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Home My WebLink About07-13-2011 Administration Committee Agenda 07/13/11 Administration Committee Agenda Page 1 of 3 Orange County Sanitation District Regular Meeting of the Administration Committee Wednesday, July 13, 2011 5:30 P.M. Administration Building Board Room 10844 Ellis Avenue Fountain Valley, CA (714) 593-7130 AGENDA PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: PUBLIC COMMENTS: If you wish to speak, please complete a Speaker’s Form and give it to the Clerk of the Board. Speakers are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: CONSENT CALENDAR: 1. Approve Minutes of the June 8, 2011, Administration Committee meeting. ACTION ITEMS: 2. A. Approve a Professional Services Agreement with LabWare, Inc., for a Laboratory Information System Ocean Monitoring Module, Specification No. CS-2011-474, for a total amount not to exceed $104,200; and B. Approve a contingency of $10,420 (10%). 3. Recommend to the Board of Directors to: Authorize the General Manager to issue new fixed rate Certificates of Participation (COP), to be referred to as Wastewater Revenue Obligations, in an amount sufficient to refund up to $191.5 million of COP Series 2003 and up to $113.8 million of COP Series 2000 for a total of up to $305.3 million. 07/13/11 Administration Committee Agenda Page 2 of 3 4. Recommend to the Board of Directors to: Adopt Resolution No. OCSD 11-XX, Authorizing the Orange County Sanitation District’s Treasurer to Invest and/or Reinvest District’s Funds; Adopting District’s Investment Policy Statement and Performance Benchmarks for FY 2010-11; and Repealing Resolution No. OCSD 10-14. 5. Recommend to the Board of Directors to: Adopt Resolution No. OCSD 11-XX, Establishing Policies and Procedures for the Award of Purchase Orders and Contracts; Award of Public Works Construction Contracts; Professional Services and Design Contracts; and Delegation of Authority to Implement said Policies and Procedures; and Repealing Resolution No. OCSD 07-04. CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. (1) CONFER WITH DISTRICT NEGOTIATORS (Government Code Section 54954.5(f)) · Agency Designated Representatives: James D. Ruth, General Manager; Robert Ghirelli, Assistant General Manager; Jim Herberg, Assistant General Manager, Jeff Reed, Director of Human Resources; and, Richard Spencer, Human Resources Supervisor. · Employee Organization: Orange County Employees Association (OCEA) Reconvene in regular session and consider action, if any, on matters discussed in closed session. INFORMATIONAL ITEMS: N/A 07/13/11 Administration Committee Agenda Page 3 of 3 OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, September 14, 2011, at 5:30 p.m. Accommodations for the Disabled: Meeting rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board’s office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted outside the main gate of the Sanitation District’s Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less than 72 hours prior to the meeting to all, or a majority of the Board of Directors are available for public inspection in the office of the Clerk of the Board. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Maria E. Ayala, Clerk of the Board (714) 593-7130 mayala@ocsd.com Page 1 of 3 ADMINISTRATION COMMITTEE Meeting Date 07/13/11 To Bd. of Dir. - AGENDA REPORT Item Number 2 Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: Implementation of an Ocean Monitoring Module. GENERAL MANAGER'S RECOMMENDATION A. Approve a Professional Services Agreement with LabWare, Inc., for a Laboratory Information System Ocean Monitoring Module, Specification No. CS-2011-474, for a total amount not to exceed $104,200; and, B. Approve a contingency of $10,420 (10%). SUMMARY The ocean monitoring workgroup performs the collection and analysis of samples used to assess recreational water quality and potential impacts of the wastewater discharge on the ocean sediments and community of animals living in the area of discharge. The data management needs for ocean monitoring have grown substantially over the past 10 years. The Environmental Laboratory performs chemical analyses of the influent and treatment process streams and ocean receiving waters, sediments, and fish tissues. Collectively, this data is used to evaluate treatment processes and potential environmental impacts of the discharge in compliance with the District’s NPDES permit. In 2007, the Environmental Laboratory and the Ocean Monitoring sections were merged, but their data management systems remained separate. Consequently, the Environmental and Ocean Monitoring Laboratory has had a need to unify the management and storage of data generated from the ocean monitoring program with that of the Laboratory. This procurement will integrate all ocean data with the Laboratory’s existing Laboratory Information Management System (LIMS). The effort will streamline the entry, management, and storage of the ocean monitoring data, and enhance the analysis and interpretation of the monitoring data for the calculations of compliance with California Ocean Plan standards and provide assessments of environmental conditions in the receiving waters environment. Page 2 of 3 PRIOR COMMITTEE/BOARD ACTIONS April 2009: Presentation and Tour of New Taxonomy Lab to the Operations Committee February 1997: Specification E-268, Implementation of a Laboratory Information Management System ADDITIONAL INFORMATION Project Objectives: · Centralize and integrate ocean monitoring program data within the Laboratory Information System (LIMS) and make it accessible to LIMS users to improve data sharing · Develop intuitive, simplified data entry (or upload) processes for each data type · Incorporate Master Species List management system · Improve information sharing with internal and external organizations · Enhance the ability and effectiveness of staff to perform their jobs · Increase data security · Facilitate the electronic capture of data · Eliminate redundant data throughout the organization · Import historical data from 1985 to present for each data type · Provide future ability to import historical data from 1970–1985 for each data type as needed On February 10, 2011, the Sanitation District issued a Request for Proposal (RFP) and on March 8, 2011, two proposals were received. A panel consisting of five Sanitation District staff reviewed and ranked each of the proposals in accordance with Resolution No. OCSD 07-04, Section 5.07. Proposal evaluation criteria included five parts as follows: · Qualifications of the firm · Staffing and project organization · Work plan · Cost and price · Presentation Following the technical proposal evaluations, interviews were conducted on April 7, 2011 with the two proposers. The proposal review panel ranked LabWare, Inc. as the most qualified firm. All proposals were accompanied by a sealed fee proposal. The fee proposals were not opened until the proposal evaluation process was complete, interviews conducted and the results compiled. Staff met with the top ranked firm and reviewed the Fee Proposal. A negotiated amount was achieved. Page 3 of 3 Staff recommends awarding the professional agreement to LabWare, Inc. in a not-to-exceed amount of $104,200. PROPOSAL EVALUATION TABLE EVALUATORS PROPOSERS & SCORE CSOLS LabWare Reviewer A 797 940 Reviewer B 692 850 Reviewer C 692 905 Reviewer D 727 842 Reviewer E 687 810 Overall Score 3595 4347 Ranking 2 1 Proposal Fee $276,000 $164,500 Negotiated Fee NA $104,200 CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District’s Delegation of Authority. This item has been budgeted. Date of Approval Contract Amount Contingency 07/13/11 $104,200 $10,420 (10%) H:\dept\asd\210\fields\ADMIN COMMITTEE BY MONTH\JULY 2011\Agenda Report CS-2011-474 Laboratory Information System Monitoring Module r1 (Castillon) .docx Page 1 of 4 ADMINISTRATION COMMITTEE Meeting Date 07/13/11 To Bd. of Dir. 07/27/11 AGENDA REPORT Item Number 3 Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: Refunding Long-Term Debt GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to issue new fixed rate Certificates of Participation (COP), to be referred to as Wastewater Revenue Obligations, in an amount sufficient to refund up to $191.5 million of COP Series 2003 and up to $113.8 million of COP Series 2000, for a total of up to $305.3 million. SUMMARY Long-term tax-exempt interest rates increased significantly starting last year and continued higher through the beginning of 2011. Municipal new issuance volume this year has remained considerably lower than previous years which contributed to a dramatic decrease in tax-exempt yields beginning in April. With the decline in interest rates, the Sanitation District has the potential opportunity to refinance a portion of its outstanding debt to reduce interest costs. One opportunity is the economic refunding of the Sanitation District’s outstanding COP Series 2003. Under current market conditions, three maturities of the COP Series 2003, equal to $47.5 million, may be advance refunded generating in excess of 3.0% present value savings (the minimum percentage required by the Sanitation District’s debt policy). The savings are contingent on market conditions at the time of the refunding sale; however, if interest rates decline even further, additional maturities could also be refunded and produce the requisite savings targets. The outstanding amount of COP Series 2003 is currently $191.5 million. Another refunding opportunity is the fixed rate refunding of a portion of the variable rate COP 2000 Series. Over the next seven years, $113.8 million of variable rate COP 2000 Series will become due and payable by the Sanitation District. The ancillary costs (not including the variable interest rate demanded by COP holders) to support the variable rate program, consisting of bank support fees and remarketing fees, currently is 57 basis points (0.57%) per year. By refunding a portion of the variable rate COP 2000 Series, the Sanitation District avoids paying these relatively high ancillary costs and instead pays new investors a fixed interest rate. As an illustrative example, under current market conditions, the Sanitation District could issue a one-year fixed rate maturity at approximately 0.25% which is less than the 0.57% ancillary costs (even without factoring in the variable rate interest payable to the investor). Page 2 of 4 Approval of the recommended actions above will direct staff to begin the process of refunding a part, or all, of the outstanding $191.5 million COP Series 2003 and up to $113.8 million of COP Series 2000 debt utilizing the assistance of Public Resources Advisory Group (PRAG), as financial advisor, and the bond counsel firm of Fulbright & Jaworski. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The Sanitation District currently has ten series of debt issuances outstanding in the par amount of $1.405 billion. The following table lists each issuance, the outstanding amount, and the interest rate mode. Outstanding Par Amount(1) Interest Rate Mode Series 2010C Refunding(2) $ 157,000,000 Fixed Rate Series 2010B(3) 154,665,000 Fixed Rate (one-year) Series 2010A(2) 80,000,000 Fixed Rate Series 2009A(2) 194,595,000 Fixed Rate Series 2008B Refunding(4) 26,975,000 Fixed Rate Series 2008A Refunding(4) 30,535,000 Fixed Rate Series 2007B(2) 284,825,000 Fixed Rate Series 2007A Refunding(5) 91,350,000 Fixed Rate Series 2003(2) 191,500,000 Fixed Rate Series 2000 Refunding(6) 194,000,000 Daily Variable Rate Total : $1,405,445,000 (1) As of June 30, 2011 (2) New money debt issue. (3) Series 2010B are fixed one-year certificate of anticipation notes (CANS) that refunded the Series 2009B CANS that refunded the 2008C CANS that were issued to refund the Series 2006 Daily Variable Rate that were supported by a weak liquidity facility bank. (4) Series 2008B and Series 2008A refunded the Series 1993 and Series 1992 Synthetic Variable-to-Fixed Rate Debt issues that were supported by a failing insurance provider. Series 1993 and 1992 refunded the Series 1986 and a portion of the Series “B” COPs. (5) Series 2007A refunded a portion of COP Series 2003 for debt service savings. (6) Series 2000 COPs refunded the Series A, B, and C issued between 1990 and 1992. Page 3 of 4 Refunding Strategy Under current market conditions, staff is proposing to refund at least $47.5 million of COP Series 2003 maturing in years 2022 through 2024 with annual coupon rates of 5.00%, as shown in the chart below. A refunding of the 2022, 2023, and 2024 maturities would produce $2.37 million in present value savings (5.0% of refunded par) in the current market. Additional bond maturities may be refunded depending on the market rates at the time of issuance. Maturity Principal Amount Coupon Call Date 02/01/22 $ 15,100,000 5.00% 08/01/13 02/01/23 15,805,000 5.00% 08/01/13 02/01/24 16,640,000 5.00% 08/01/13 02/01/25 17,425,000 5.00% 08/01/13 02/01/26 18,350,000 5.00% 08/01/13 02/01/33 108,180,000 5.00% 08/01/13 Total : $ 191,500,000 Staff is also proposing to refund a portion of its variable rate COP 2000 Series with fixed rate debt. Over the next seven years, $113.8 million of variable rate COP 2000 Series will become due and payable. Although the recent interest rate resets on the COP 2000 Series have been at historic lows with daily resets averaging 0.164% in 2011, the ancillary costs required for the variable rate program equal an additional 0.57% annually, comprising of bank support fees and remarketing fees. Although the variable rate program has served the Sanitation District well, there is the risk that short-term tax- exempt interest rates will rise from the current low levels and there are market expectations that bank support fees will begin to become more expensive in the near future due to financial reforms to be instituted on banks as a result of the global financial crisis. To mitigate these potential risks, the Sanitation District could currently issue one-year fixed rate refunding bonds at approximately 0.25% which would save 0.32% even if variable rate interest costs were 0.00%. Five-year fixed rates are currently approximately 1.40% which, for this refunding analysis, means the Sanitation District would be economically better off if variable rate interest costs over the next five years average more than 0.83% (which also assumes the bank support fee which expires in August 2012 does not increase from the current fee paid by the Sanitation District). Under current market conditions, staff would expect to refund $89.8 million of the COP Series 2000 with fixed rates of no more than 2.00%. The table below highlights the potential COP Series 2000 refunding candidates, current market fixed rate yields, and a break-even variable rate if the maturity is refunded: Page 4 of 4 Sinking Fund Principal Amount Fixed Rate Yield(1) Break-Even Variable Rate(2) 08/01/12 $ 11,300,000 0.25% -0.32% 08/01/13 13,300,000 0.50% -0.07% 08/01/14 12,100,000 0.80% 0.23% 08/01/15 12,500,000 1.10% 0.53% 08/01/16 17,500,000 1.40% 0.83% 08/01/17 23,100,000 1.80% 1.23% 08/01/18(3) 24,000,000 2.20% 1.63% Total : $ 113,800,000 (1) Current market conditions, subject to change (2) Average daily rate resents and assumes ancillary costs remain 0.57% over the specified period (3) Not currently under consideration for refunding, but may become a refunding candidate if fixed rates decline further Timeline Due to the fact that this is a fixed-rate debt issuance, staff is proposing to issue the refunding through a competitive sale because it is the most expeditious way to access the market and it is expected to provide the lowest interest cost for this given structure. August  Board approval of legal and disclosure documents  Financing Corporation approval of legal and disclosure documents September  Rating Agency discussions  Publish Notice of Intention to Sell  Marketing and Sale through a Competitive Sale Process October  Closing  Begin debt administration All costs involved with the refunding, including costs for PRAG and Fulbright & Jaworski will be paid from the proceeds of the new refunding issue. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A JDR:LT:MW/jmf http://sharepoint/gm/board/Agenda Report Form Library/Agenda Report Debt Refunding Authorization (White) 6-27-11.docx Page 1 ADMINISTRATION COMMITTEE Meeting Date 07/13/11 To Bd. of Dir. 07/27/11 AGENDA REPORT Item Number 4 Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 11-XX, Authorizing the Orange County Sanitation District’s Treasurer to Invest and/or Reinvest District’s Funds; Adopting District’s Investment Policy Statement and Performance Benchmarks for FY 2010-11; and Repealing Resolution No. OCSD 10-14. SUMMARY This agenda item presents the annual review of the Orange County Sanitation District's Investment Policy Statement to the Administration Committee for consideration in the Committee's capacity as the oversight committee for the Investment Policy (Section 16.2). With adoption of the Resolution, the Board of Directors would readopt the Sanitation District's current Investment Policy Statement, portfolio performance benchmarks, and monitoring and reporting requirements for FY 2011-12. The Sanitation District's Investment Policy Statement is recommended for adoption for FY 2011-12 without any changes as there have been no changes to the State Government Code since the adoption of the FY 2010-11 Investment Policy, and staff has no recommended changes. Staff will continue to monitor pending legislative and regulatory proposals in the public finance area for their potential impact on the Sanitation District’s existing financial programs. The Sanitation District’s Investment Policy Statement has received the Investment Policy Certification of Excellence Award from the Municipal Treasurer’s Association of the United States and Canada. PRIOR COMMITTEE/BOARD ACTIONS July 28, 2010 – Board adopted Resolution No. OCSD 10-14, Authorizing the Orange County Sanitation District’s Treasurer to Invest and/or Reinvest District’s Funds; Adopting District’s Investment Policy Statement and Performance Benchmarks for FY 2009-10; and, Repealing Resolution No. OCSD 09-10. Page 2 ADDITIONAL INFORMATION Background The Investment Policy governs the investment activities of Pacific Investment Management Company (PIMCO), the Sanitation District's external money manager, on behalf of the District. On April 25, 2005, the Sanitation District's Investment Policy Statement received the Investment Policy Certification of Excellence Award from the Municipal Treasurer's Association of the United States and Canada. A copy of the letter of certification is included each year in the annual Investment Policy document. The Sanitation District received its first Award of Excellence for the Investment Policy Statement in December 1996. The Investment Policy document itself consists of the Investment Policy Statement and the following eight appendices: A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Pool Questionnaire (LAIF) E. Board Resolution No. OCSD-10-14 F. Sample Monthly & Quarterly Investment Program Monitoring Reports G. Sections of the California Government Code Pertinent to Investing Public Funds H. Glossary of Investment Terms This document will be updated and delivered to Administration Committee members following the adoption of the Sanitation District’s investment policy statement. Annual Review of Investment Policy The Investment Policy includes the requirement that the Sanitation District shall review its Investment Policy annually (Sections 1.2 and 16.1). Annual Delegation of Investment Authority Effective January 1, 1997, Section 53607 of the Code states that governing boards of local agencies may only delegate authority to invest and/or reinvest agency funds to the agency's Treasurer for a one-year period. With adoption of the Resolution, the Board of Directors would renew its delegation of investment authority to the Director of Finance/Treasurer for a one-year period in compliance with the requirements of Section 53607. Each year, the Board of Directors will consider similar actions along with the annual reconsideration of the Sanitation District's Investment Policy. Page 3 CEQA N/A BUDGET / DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENTS Exhibit A - OCSD FY 2011-12 Investment Policy Statement Exhibit B - Performance Monitoring & Reporting Summary Exhibit C - Resolution JDR:LT:MW:jmf H:\dept\asd\210\fields\ADMIN COMMITTEE BY MONTH\JULY 2011\Agenda Report Investment Policy Update 11-12 (White).docx ORANGE COUNTY SANITATION DISTRICT INVESTMENT POLICY STATEMENT Proposed for Review and Approval By Administration Committee On July 13, 2011 And for Adoption By Board of Directors On July 27, 2011 TABLE OF CONTENTS Section Topic Page 1.0 Policy ......................................................................................1 2.0 Scope ......................................................................................1 3.0 Standard of Prudence .............................................................1 4.0 Investment Objectives .............................................................2 5.0 Delegation of Authority ............................................................2 6.0 Ethics and Conflicts of Interest ................................................3 7.0 Authorized Financial Dealers and Institutions .........................4 8.0 Authorized and Suitable Investments ......................................5 9.0 Collateralization.......................................................................9 10.0 Safekeeping and Custody .......................................................9 11.0 Diversification ..........................................................................9 12.0 Maximum Maturities .............................................................. 11 13.0 Internal Control...................................................................... 12 14.0 Performance Objectives and Benchmarks ............................ 12 15.0 Reporting .............................................................................. 12 16.0 Investment Policy Adoption and Revision ............................. 13 Appendix A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Pool Questionnaire (LAIF) E. Board Resolution No. OCSD-11-XX F. , Authorizing the District's Treasurer to Invest and/or Reinvest District Funds, and Adopting Investment Policy and Performance Benchmarks G. Quarterly Investment Program Monitoring Reports H. Sections of the California Government Code Pertinent to Investing Public Funds I. Glossary of Investment Terms Page 1 of 13 ORANGE COUNTY SANITATION DISTRICT INVESTMENT POLICY STATEMENT 1.0 Policy: It is the policy of the Orange County Sanitation District (OCSD) to invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonably anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. 1.1. This Investment Policy is set forth by OCSD for the following purposes: 1.1.1. To establish a clear understanding for the Board of Directors, OCSD management, responsible employees and third parties of the objectives, policies and guidelines for the investment of the OCSD’s idle and surplus funds. 1.1.2. To offer guidance to investment staff and any external investment advisors on the investment of OCSD funds (see Appendix "A"). 1.1.3. To establish a basis for evaluating investment results. 1.2. OCSD establishes investment policies which meet its current investment goals. OCSD shall review this policy annually, and may change its policies as its investment objectives change. 2.0 Scope: This Investment Policy applies to all financial assets of OCSD; except for the proceeds of OCSD's capital projects financing program, which are invested in accordance with provisions of their specific bond indentures; and such other funds excluded by law or other Board-approved covenant or agreement. These funds are accounted for by OCSD as Enterprise Funds as represented in OCSD's Comprehensive Annual Financial Report. 3.0 Standard of Prudence: The standard of prudence to be used by OCSD internal staff, and any authorized investment advisor(s), shall be as described in Section 53600.3 of the California Government Code as follows: Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds Page 2 of 13 pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. 4.0 Investment Objectives: The primary objectives of OCSDs investment activities, in priority order, and as described in Section 53600.5 of the California Government Code, shall be: 4.1 Safety: The safety and preservation of principal is the foremost objective of the investment program of OCSD. Investments shall be selected in a manner that seeks to ensure the preservation of capital in OCSD's overall portfolio. This will be accomplished through a program of diversification, more fully described in Section 11.0, and maturity limitations, more fully described in Section 12.0, in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 4.2 Liquidity: The investment program will be administered in a manner that will ensure that sufficient funds are available for OCSD to meet its reasonably anticipated operating expenditure needs. 4.3 Return on Investments: The OCSD investment portfolio will be structured and managed with the objective of achieving a rate of return throughout budgetary and economic cycles, commensurate with legal, safety, and liquidity considerations. 5.0 Delegation of Authority: 5.1 Authority to manage OCSD’s investment program is derived from the California Government Code Sections 53600 et seq. and Sections 53635 et seq. The Board of Directors hereby delegates management responsibility for the OCSD investment program to its Director of Finance and Administrative Services/Treasurer, who shall establish written procedures for the operation of the investment program, consistent with this Policy. The Controller/Assistant Treasurer shall be responsible for day-to-day administration, monitoring, and the development of written administrative procedures for the operation of the investment program, consistent with this Policy. The current treasury management procedures are presented in Appendix "B." No person may engage in an investment Page 3 of 13 transaction except as provided under the terms of this Policy and the procedures established by the Treasurer. The Treasurer shall be responsible for all transactions undertaken by OCSD internal staff, and shall establish a system of controls to regulate the activities of internal staff and external investment advisors engaged in accordance with Section 5.3. 5.2 The administrative procedures for the operation of OCSD's investment program will provide for, but not be limited to, the following: 5.2.1 Formats for monthly and quarterly reports to the Administration Committee, and the Board of Directors. 5.2.2 Compliance with generally accepted accounting principles of the Government Accounting Standards Board. 5.2.3 Establishment of benchmarks for performance measurement. 5.2.4 Establishment of a system of written internal controls. 5.2.5 Establishment of written procedures for competitive bids and offerings of securities that may be purchased or sold by internal OCSD staff. 5.2.6 Establishment of a Desk Procedures Manual for treasury operations and management. 5.3 The Board of Directors of OCSD may, in its discretion, engage the services of one or more registered investment advisors to assist in the management of OCSD’s investment portfolio in a manner consistent with OCSD’s objectives. Such external investment advisors, which shall be selected through a competitive process, shall be granted discretion to purchase and sell investment securities in accordance with this Investment Policy. Such advisors must be registered under the Investment Advisers Act of 1940, or be exempt from such registration. 6.0 Ethics and Conflicts of Interest: 6.1 Officers and employees of OCSD involved in the investment process shall refrain from personal business activities that could conflict with proper execution of OCSD's investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General Manager any material financial interests in financial institutions that conduct business within OCSD's boundaries, and they shall further disclose any large personal financial/investment positions, the performance of which could be related to the performance of positions in OCSD’s portfolio. Page 4 of 13 7.0 Authorized Financial Dealers and Institutions: 7.1 For investment transactions conducted by OCSD internal staff, the Treasurer will maintain a list of financial institutions authorized to provide investment services to OCSD, including "primary" or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital rule), and Federal or State of California chartered banks. No public deposit shall be made except in a qualified public depository as established by State law. All financial institutions which desire to become qualified bidders for investment transactions with OCSD must supply the following for evaluation by the Treasurer: 7.1.1. Audited financial statements for the institution’s three (3) most recent fiscal years. 7.1.2. A statement, in the format prescribed by the Government Finance Officers Association (GFOA), certifying that the institution has reviewed OCSD’s Investment Policy and that all securities offered to the Districts shall comply fully and in every instance with all provisions of the California Government Code and with this Investment Policy. The current statement is presented in Appendix "C." 7.1.3. A statement describing the regulatory status of the dealer, and the background and expertise of the dealer's representatives. Selection of financial institutions, broker/dealers, and banks authorized to engage in transactions with OCSD shall be made through a competitive process. An annual review of the financial condition of qualified institutions will be conducted by the Treasurer. 7.2 Selection of broker/dealers used by external investment advisors retained by OCSD, shall be in compliance with contract provisions between OCSD and any external investment advisors, and shall be in substantially the following form: Use of Securities Brokers: Neither the Investment Advisor nor any parent, subsidiary or related firm shall act as a securities broker with respect to any purchases or sales of securities which may be made on behalf of OCSD, provided that this limitation shall not prevent the Investment Advisor from utilizing the services of a securities broker which is a parent, subsidiary or related firm, provided such broker effects transactions on a "cost only" or "nonprofit" basis to itself and provides competitive execution. The Investment Advisor shall provide the Districts with a list of suitable independent brokerage firms (including names and addresses) meeting the requirements of Government Code Section 53601.5, and, unless otherwise directed by OCSD, the Investment Advisor may utilize the Page 5 of 13 service of any of such independent securities brokerage firms it deems appropriate to the extent that such firms are competitive with respect to price of services and execution. 8.0 Authorized and Suitable Investments: All investments shall be made in accordance with the California Government Code including Sections 16429.1 et seq., 53600 et seq., and 53684, and as described within this Investment Policy. Permitted investments under this Policy shall include: 8.1 Securities, obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by the US Government, a federal agency, or a US Government-sponsored enterprise pursuant to Section 53601 (e) of the California Government Code. Investment in mortgage-backed bonds and CMOs is not governed by this Section 8.1, even if such bonds are issued by agencies of the US Government. See Section 8.2 for conditions of purchase of mortgage- backed securities. See Section 8.12 for conditions of purchase of CMOs. 8.2 Mortgage-backed securities issued by an agency of the US Government, which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof. Purchase of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE-REMICs (Real Estate Mortgage Investment Conduits), is hereby prohibited. 8.3 Commercial paper of "prime" quality and rated "P1" by Moody’s Investor Services (Moody’s), and rated "A1" by Standard & Poor’s Corporation (S&P), and issued by a domestic corporation organized and operating in the United States with assets in excess of $500 million and having a rating of "A" or better on its long-term debt as provided by Moody's or S&P. Purchases of eligible commercial paper may not exceed 270 days to maturity from the date of purchase. Purchases of commercial paper shall not exceed 15% of the market value of the portfolio, except that a maximum of 25% of the market value of the portfolio may be invested in commercial paper, so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. No more than 5% of the market value of the portfolio, or 10% of the issuer's outstanding paper, may be invested in commercial paper issued by any one (1) eligible corporation. 8.4 Banker’s acceptances issued by institutions, the short-term obligations of which are rated a minimum of "P1" by Moody’s, or "A1" by S&P provided that: (a) the acceptance is eligible for purchase by the Federal Reserve System; (b) the maturity does not exceed 180 days; (c) no more than 40% of the total portfolio may be invested in banker’s acceptances; and (d) no more than 30% of the total portfolio may be invested in the banker's acceptances of any one (1) commercial bank. Page 6 of 13 8.5 Medium term (or corporate) notes of a maximum of five (5) years maturity issued by corporations organized and operating within the United States, or issued by depository institutions licensed by the United States, or any state, and operating within the United States with assets in excess of $500 million, and which is rated in a rating category of “A” or better on its long-term debt as provided by Moody’s or S&P. Notes eligible for investment under this section shall be rated at least “A3” or better by Moody's, or “A-“or better by S&P. If, at the time of purchase, an eligible note is rated in a rating category of “A” or better by only one rating agency, the note shall also be rated at least “BBB” by the other rating agency. If, after purchase, the rating of an eligible note in a rating category of "A" or better, is downgraded to "BBB," the external investment advisor shall notify the District of the downgrade, and shall present an analysis and recommendations as to the disposition of the note consistent with the investment objectives of this Investment Policy. The above restrictions pertain to the “direct issuer” and do not extend to the parent corporation of the direct issuer. No more than 35% of the portfolio may be invested in both medium term notes, as described here in 8.5, and notes, bonds, or other obligations, as described in 8.6. 8.6 Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by California Government Code Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by California Government Code Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation, and the security interest shall be perfected in accordance with the requirements of the Uniform Commercial Code or federal regulations applicable to the types of securities in which the security interest is granted. No more than 35% of the portfolio may be invested in securities described in 8.5 and 8.6. 8.7 Shares of mutual funds investing in securities permitted under this policy and under Section 53601 (k) of the California Government Code. Such funds must either: (1) attain the highest ranking, or the highest letter and numerical rating, provided by not less than two of the three largest nationally recognized rating services; or (2) have an Investment Advisor registered with the Securities and Exchange Commission with not less than five (5) years of experience investing in the securities and obligations authorized under this Policy and under California Government Code Section 53601, and with assets under management in excess of $500 million. The purchase price of shares of beneficial interest purchased pursuant to this policy, and the California Government Code may not include any commission that the companies may charge, and shall not exceed 15% of the District’s surplus money that may be invested pursuant Page 7 of 13 to this section. However, no more than 10% of the District’s surplus funds may be invested in shares of beneficial interest of any one (1) mutual fund pursuant to this section. 8.8 Certificates of deposit: 8.8.1 Secured (collateralized) time deposits issued by a nationally or state-chartered bank or state or federal savings and loan association, as defined by Section 5102 of the California Financial Code, and having a net operating profit in the two (2) most recently completed fiscal years. Collateral must comply with Chapter 4, Bank Deposit Law, Section 16500 et seq., and Chapter 4.5, Savings and Loan Association and Credit Union Deposit Law, Section 16600 et seq., of the California Government Code. 8.8.2 Negotiable certificates of deposit (NCDs) issued by a nationally or state-chartered bank or state of federal savings and loan association, as defined by Section 5102 of the California Financial Code; and which shall have a rating of "A" or better on its long-term debt as provided by Moody's or S&P; or which shall have the following minimum short-term ratings by at least two (2) rating services: "P1" for deposits by Moody's, "A1" for deposits by S&P, or comparably rated by a nationally recognized rating agency which rates such securities; or as otherwise approved by the District's Board of Directors. 8.8.3 To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured individual loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisorial agency of its record of meeting the credit needs of California’s communities, including low and moderate income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. 8.9 Taxable or tax-exempt municipal bonds issued by any of the 50 United States. Such securities must be rated "A3" or higher by Moody's, or "A-" or higher by S&P; or as otherwise approved by the Districts’ Board of Directors. 8.10 The State of California Local Agency Investment Fund (LAIF). The LAIF is an investment alternative for California's local governments and special districts managed by the State Treasurer's Office. LAIF is more fully described in the Glossary (See Appendix "H.") The District shall use LAIF as a short-term cash management facility. Investment of District funds in LAIF shall be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. See Appendix "D" for investment pool questionnaire. Page 8 of 13 8.11 The Orange County Treasurer's Money Market Commingled Investment Pool (OCCIP). The OCCIP is a money market investment pool managed by the Orange County Treasurer's Office. OCCIP is more fully described in the Glossary. (See Appendix "H.") The District has no funds invested in OCCIP at this time. Investment of District funds in OCCIP would be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. 8.12 Collateralized mortgage obligations (CMOs) issued by agencies of the US Government which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof, and asset-backed securities rated "Aaa" by Moody's and "AAA" by S&P. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE- REMICS (Real Estate Mortgage Investment Conduits), is hereby prohibited. Securities eligible for purchase under this Section 8.11 shall be issued by an issuer having a rating on its unsecured long-term debt of "A" or higher. Combined purchases of mortgage-backed securities, CMOs and asset-backed securities as authorized under within Section 8.0, may not exceed 20% of the total Long-Term Operating Monies portfolio. 8.13 Repurchase agreements provided that: 8.13.1 All repurchase agreements shall be collateralized with securities eligible for purchase under this Policy. In order to anticipate market changes and to provide a level of security for all repurchase agreement transactions, collateralization shall be maintained at a level of at least 102% of the market value of the repurchase agreements, and shall be adjusted no less than weekly. 8.13.2 All repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.14 Reverse repurchase agreements provided that: 8.14.1 No more than five percent (5%) of OCSD’s portfolio shall be invested in reverse repurchase agreements, and there shall be no long- term reverse repurchase agreements unless otherwise authorized by the Districts’ Board of Directors. 8.14.2 The maximum maturity of reverse repurchase agreements shall be ninety (90) days. 8.14.3 Reverse repurchase agreements shall mature on the exact date of a known cash flow which will be unconditionally available to repay the maturing reverse repurchase agreement. Page 9 of 13 8.14.4 Proceeds of reverse repurchase agreements shall be used solely to supplement portfolio income or to provide portfolio liquidity, and shall not be used to speculate on market movements. 8.14.5 All reverse repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the reverse repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.15 Sales of OCSD-owned securities in the secondary market may incur losses in order to improve the risk or return characteristics of the portfolio, to prevent anticipated further erosion of principal, or when trading for securities that result in an expected net economic gain to OCSD. 8.16 If securities owned by the OCSD are downgraded by either Moody’s or S&P to a level below the quality required by this Investment Policy, it shall be OCSD’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. If a decision is made to retain the downgraded securities in the portfolio, their presence in the portfolio will be monitored and reported monthly to the OCSD General Manager, the Administration Committee and Board of Directors. 9.0 Collateralization: Generally, the value to secure deposits under this Policy shall comply with Section 53652 of the California Government Code. Collateralization will be required for secured time deposits, as more fully described in Section 8.8.1; and repurchase agreements, as more fully described in Section 8.13.1. Collateral will always be held by an independent third-party, as more fully described in Section 10.1. The right of collateral substitution is granted. 10.0 Safekeeping and Custody: 10.1 All securities transactions, including collateral for repurchase agreements, entered into by, or on behalf of OCSD, shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by OCSD's third-party custodian bank, which shall be selected through a competitive process, or that agent's representative, or in the agent's account at the Federal Reserve Bank, or within clearing corporations in the U.S., and evidenced by book entry statements. 11.0 Diversification: OCSD will diversify its investments by security type, issuer, and financial institution in accordance with the following: Page 10 of 13 11.1 There is no limit on investment in securities issued by or guaranteed by the full faith and credit of the U.S. government. 11.2 No more than 20% of the portfolio may be invested in securities of a single agency of the U.S. government, which does not provide the full faith and credit of the U.S. government. 11.3 No more than 5% of the portfolio may be invested in securities of any one issuer, other than the U.S. government or its agencies. Investment in mutual funds is not governed by this Section 11.3. See Section 11.8 for conditions of purchase of mutual funds. 11.4 No individual holding shall constitute more than 5% of the total debt outstanding of any issuer. 11.5 No more than 40% of the portfolio may be invested in banker’s acceptances. 11.6 No more than 15% of the portfolio may be invested in commercial paper, except that 25% of the portfolio may be so invested so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. 11.7 No more than 30% of the portfolio may be invested in medium-term (corporate) notes. 11.8 No more than 15% of the portfolio may be invested in mutual funds. However, no more than 10% of the District’s portfolio may be invested in shares of beneficial interest of any one (1) mutual fund. 11.9 No more than 30% of the portfolio may be invested in negotiable certificates of deposit. 11.10 No more than 10% of the portfolio may be invested in eligible municipal bonds. 11.11 No more than 20% of the Long Term Operating Monies portfolio may be invested in a combination of mortgage-backed securities, CMOs and asset-backed securities. Mortgage-backed securities, CMOs and asset-backed securities may only be purchased by the Districts’ external money managers, Pacific Investment Management Company (PIMCO), with prior Board approval (authorized by Board Minute Order, January 22, 1997), and may not be purchased by the District's staff. 11.12 No more than the lesser of 15% of the portfolio or the statutory maximum may be invested in LAIF. 11.13 No more than 15% of the portfolio may be invested in the Orange County Investment Pool. Page 11 of 13 11.14 No more than 20% of the portfolio may be invested in repurchase agreements. 11.15 No more than 5% of the portfolio may be invested in reverse repurchase agreements. 12.0 Maximum Maturities: To the extent possible, OCSD will attempt to match its investments with reasonably anticipated cash flow requirements. The Treasurer shall develop a five-year cash flow forecast, which shall be updated quarterly. Based on this forecast, the Treasurer shall designate, from time-to-time, the amounts to be allocated to the investment portfolio. OCSD monies invested in accordance with this Policy are divided into two (2) categories: 12.1 Liquid Operating Monies. Funds needed for current operating and capital expenditures are known as Liquid Operating Monies. 12.1.1 The maximum final stated maturity of individual securities in the Liquid Operating Monies account portfolio shall be one (1) year from the date of purchase. 12.1.2 The average duration of the Liquid Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts’ cash flow requirements, but may never exceed 180 days. 12.2 Long Term Operating Monies. Funds needed for longer term purposes are known as the Long Term Operating Monies. 12.2.1 Except for the purchase of securities by the District’s external money manager, PIMCO, the maximum final stated maturity of individual securities in the Long Term Operating Monies account portfolio shall be five (5) years from the date of purchase. PIMCO may purchase any security that is permitted under Section 8.0 of this policy, including those which may have a stated maturity of more than five (5) years from the date of purchase when, in the opinion of PIMCO, such an investment meets the investment objectives of this portfolio and the duration requirements are met below. 12.2.2 The duration of the Long Term Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts’ five-year cash flow forecast, but may never exceed 60 months. 12.2.3 The duration of the Long Term Operating Monies account portfolio shall never exceed 120% of the duration as established in accordance with Section 12.2.2. 12.2.4 The duration of the Long Term Operating Monies account portfolio shall never be less than 80% of the duration as established in accordance with Section 12.2.2 Page 12 of 13 13.0 Internal Control: 13.1 The Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. The current treasury management procedures are presented in Appendix "B." 14.0 Performance Objectives and Benchmarks: 14.1 Overall objective. The investment portfolio of OCSD shall be designed with the overall objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with investment risk constraints and reasonably anticipated cash flow needs. 14.2 The Liquid Operating Monies. The investment performance objective for the Liquid Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index approved by the Administration Committee, and by the District's Board of Directors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-16 (see Appendix "E"). 14.3 The Long Term Operating Monies. The investment performance objective for the Long Term Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index selected by the Administration Committee and approved by the Districts’ Board of Directors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-16 (See Appendix "E"). 15.0 Reporting: 15.1 Quarterly investment reports shall be submitted by the Treasurer to the Administration Committee which shall forward the reports to the District's Board of Directors. The quarterly reports shall be submitted to the Administration Committee within 30 days of the end of the month in accordance with California Government Code Sections 53607, 53646, and this Investment Policy. The quarterly reports shall provide clear and concise status information on the District's portfolios at the end of each reporting period, including performance measures using the benchmarks described in Section 14.0 of this Investment Policy. Sample quarterly reports are presented in Appendix "F." These reports shall contain listings of individual securities held at the end of each reporting period, and shall disclose, at a minimum, the following information about the risk characteristics of OCSD’s portfolio: 15.1.1 Cost and accurate and complete market value of the portfolio. 15.1.2 Modified duration of the portfolio compared to Benchmark. Page 13 of 13 15.1.3 Dollar change in value of the portfolio for a one-percent (1%) change in interest rates. 15.1.4 Percent of portfolio invested in reverse repurchase agreements, and a schedule which matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. 15.1.5 For the Liquid Operating Monies account only, the percent of portfolio maturing within 90 days. 15.1.6 Average portfolio credit quality. 15.1.7 Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities. 15.1.8 State that all investments are in compliance with this policy and the California Government Code, or provide a listing of any transactions or holdings which do not comply with this policy or with the California Government Code. 15.1.9 Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year to date, and since inception compared to the Benchmark returns for the same periods. 15.1.10 State that sufficient funds are available for OCSD to meet its operating expenditure requirements for the next six months, or if not, state the reasons for the shortfall. 15.2 OCSD’s Treasurer shall meet quarterly with the Administration Committee to review investment performance, proposed strategies and compliance with this Investment Policy. External investment advisors may be required to attend said meetings at the discretion of the Chairman of the Administration Committee. 16.0 Investment Policy Adoption and Revision: 16.1 The Investment Policy of OCSD shall be reviewed by the Administration Committee and shall be adopted by resolution of the Board of Directors of OCSD. The Policy shall be reviewed on an annual basis in accordance with California Government Code Section 53646, and this Investment Policy, by the Administration Committee, which shall recommend revisions, as appropriate, to the Board of Directors. Any modifications made thereto shall be approved by the Board of Directors. 16.2 The Administration Committee shall serve as the oversight committee for the District's Investment program and shall adopt guidelines for the ongoing review of duration, quality and liquidity of the District's portfolio. APPENDIX "A" SUMMARY OF INVESTMENT AUTHORIZATION INTERNAL AND EXTERNAL MANAGERS SHORT TERM OPERATING FUND INVESTMENT INTERNAL EXTERNAL U.S. Treasuries OK OK Federal Agencies Fixed coupon, fixed mat. OK Mortgage-backed NO NO Commercial paper OK OK Banker’s Accept. OK OK Medium Term Notes Fixed coupon, fixed mat.* OK Mutual Funds Money Market Only** Money Market Only Negotiable CDs Fixed coupon, fixed mat.* OK Municipal Bonds OK* NO LAIF OK NO OCIP OK NO CMOs NO NO Asset-backed NO NO Repurchase Agree. OK OK Reverse Repos OK* OK LONG TERM OPERATING PORTFOLIO INVESTMENT INTERNAL EXTERNAL U.S. Treasuries OK OK Federal Agencies Fixed coupon, fixed mat. OK Mortgage-backed NO OK Mutual Funds Money Market Only** OK Negotiable CDs Fixed coupon, fixed mat.* OK Municipal Bonds OK* OK LAIF OK NO OCIP OK NO CMOs NO With Board Approval Asset-backed NO With Board Approval Repurchase Agree. OK OK Reverse Repos OK* OK *With prior approval of the Administration Committee. **Using financial institutions approved by the Administration Committee. H:\dept\asd\210\fields\ADMIN COMMITTEE BY MONTH\JULY 2011\Investment Policy Attachment BOD61011.docx EXHIBIT "B" ORANGE COUNTY SANTIATION DISTRICT PERFORMANCE MONITORING & REPORTING SUMMARY FOR THE DISTRICT'S INVESTMENT PROGRAM POLICY REFERENCE PERFORMANCE CHARACTERISTIC REPORTING PARTY* PIMCO MELLON CALLAN 15.1.1 Cost and market value of the portfolio (monthly mark-to-market). M, Q M, Q Q 15.1.2 Modified duration of the portfolio compared to benchmark. M, Q Q 15.1.3 Dollar change in value of the portfolio for a 1% change in interest rate. M, Q Q 15.1.4 Percent of portfolio invested in reverse repurchase agreements, and a schedule which matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. M, Q 15.1.5 For the Liquid Operating Monies account only, the percent of portfolio maturing within 90 days. M, Q Q 15.1.6 Average portfolio credit quality. M, Q Q 15.1.7 Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities. M, Q Q 15.1.8 Listing of any transaction or holdings which do not comply with this policy or with the California Government Code. M, Q 15.1.9 Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year-to-date, and since inception compared to the benchmark returns for the same periods. M, Q Q ADDL** Comparison of portfolio performance to market index benchmark. M, Q Q ADDL** Comparison of Manager's performance to peer group benchmark. Q ADDL** Monitoring of organizational and structural changes of investment management firm. Q ADDL** Audit portfolios for compliance with investment policy guidelines. Q 15.1.10 OCSD will report if sufficient funds are available for it to meet operating expenditure requirements for the next six months, or if not, state the reason for the shortfall. Notes *M = Monthly *Q = Quarterly **ADDL = Monitoring of Additional Performance Characteristics RESOLUTION NO. OCSD-11-XX AUTHORIZING THE ORANGE COUNTY SANITATION DISTRICT'S TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS, AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT AND PERFORMANCE BENCHMARKS A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT, AUTHORIZING THE DISTRICT'S TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS, AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT AND PERFORMANCE BENCHMARKS; AND REPEALING RESOLUTION NO. OCSD 10-14 * * * * * * * * * * * * * * * WHEREAS, on July 28, 2010, the Board of Directors adopted Resolution No. 10-14, readopting the District's Investment Policy Statement, and establishing specific performance benchmarks and objectives, together with a schedule of frequency of investment performance reports; and, WHEREAS, pursuant to California Government Code Section 53607, the Board of Directors may delegate authority to invest and/or reinvest District's funds to the Treasurer for a one-year period; and, WHEREAS, pursuant to California Government Code Section 53646, the District is required to review its Investment Policy annually and readopt its Policy at a public meeting, which Policy will establish specific performance benchmarks and objectives, and specific monitoring and reports. NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: That the authority of the Board of Directors to invest or reinvest District's surplus funds, or to sell or exchange securities so purchased, or to deposit for safekeeping the funds and investments of the Districts with depositories, as provided for in California Government Code Sections 53608 and 53630, is hereby delegated to the District's Treasurer for a one-year period commencing on the date this Resolution is adopted, as authorized by California Government Code Section 53607. Section 2: That the Board of Directors hereby adopts the Investment Policy Statement of the Orange County Sanitation District, as set forth in Exhibit “A”, attached hereto and incorporated herein by reference. Section 3: That the Board of Directors hereby adopts the following specific performance benchmarks for their two investment funds in accordance with Section 14.0 of the District's Investment Policy: LIQUID OPERATING MONIES: The Short-Term Operating Fund will be compared to the three month T-Bill rate, and the Callan Active Cash Flow Income Style Group. The Callan Active Cash Flow Income Style Group represents a peer group of managers who operate with a maximum maturity of one year. LONG-TERM OPERATING MONIES: The Long-Term Operating Fund will be compared to the Merrill Lynch Government and Corporate One-to-Five Year Maturity Index and to the Callan Defensive Fixed Income Style Group. Section 4: That the Board of Directors hereby adopts a performance monitoring and reporting schedule, as required by Section 15.0 of the District's Investment Policy, which schedule is attached hereto as Exhibit “B”, and incorporated herein by reference. Section 5: That Resolution No. OCSD 10-14 is hereby repealed. PASSED AND ADOPTED at a regular meeting of the Board of Directors held on July 27, 2011. Chair ATTEST: Clerk of the Board http://sharepoint/gm/board/Agenda Report Form Library/Investment Policy_Att 3.docx DW-102 Board AR, Rev 10/04/10 Page 1 of 2 ADMINISTRATION COMMITTEE Meeting Date 07/13/11 To Bd. of Dir. 07/27/11 AGENDA REPORT Item Number 5 Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director, Finance and Administrative Services SUBJECT: Revising the Delegation of Authority Resolution GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 11-XX, Establishing Policies and Procedures for the Award of Purchase Orders and Contracts; Award of Public Works Construction Contracts; Professional Services and Design Contracts; and Delegation of Authority to Implement said Policies and Procedures; and Repealing Resolution No. OCSD 07-04. SUMMARY As a result of the August 2010 reorganization and continual efforts toward an efficient and effective procurement process, updates to the current Purchasing Resolution and Delegation of Authority are now recommended. These updates are proposed to ensure that new contracting and procurement controls are established, outreach and contracting opportunities enhanced, and general “housekeeping” changes implemented. This resolution was last updated in February 2007. The major changes proposed are summarized in the attached spreadsheet entitled, “Summary of Proposed Changes to the Delegation of Authority.” Most changes can be categorized as housekeeping or minor improvements, adding terms and definitions for better understanding, better clarifying authorities, and reformatting the document for ease of use. PRIOR COMMITTEE/BOARD ACTIONS February 28, 2007 – Adopted Resolution No. 07-04: Establishing Policies and Procedures for the Award of Purchasing Orders and Contracts; Award of Public Works Project Contracts; Award of Professional Services Contracts; and Delegation of Authority to Implement said Policies and Procedures were approved by the Board of Directors. ADDITIONAL INFORMATION Although past Delegation of Authority revisions have improved the Orange County Sanitation District’s (Sanitation District) ability to operate more efficiently and effectively, additional corrections and improvements are still needed. Examples include: DW-102 Board AR, Rev 10/04/10 Page 2 of 2 Capital Improvement Program (CIP) With the Sanitation District’s focus moving from major capital improvements to facilities rehabilitation and secondary treatment standards, the General Manager’s delegated authority should be adjusted to include additional flexibility with respect to the change order process. Changes in authority levels are restricted to the capital improvement process. These changes will streamline the change order approval process and will bring the authority levels in line with those for other types of procurements. Also, a new open engineering contracts prequalification process which encourages more participation at the Sanitation District is included. Additional oversight responsibilities by Contracts Administration to review and approve these change orders are incorporated. Contracts Administration resides in the Administrative Services Department outside of Construction and Design activities. Cooperative Contracts By expanding the Sanitation District’s availability to a broader range of Cooperative (Piggyback) government contracts, additional cost savings can be achieved by pooling buying power from other large government agency or government agency consortiums. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENT Summary of Proposed Changes to the Delegation of Authority MD:gc/jmf SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 1 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE I (1) Recital Of Findings Housekeeping level changes. Housekeeping level changes. II (2) Terms And Definitions Terms added and defined. Some existing terms were revised for clarification. 15 new terms were added and defined. Some existing terms were revised for clarification. III (3) Delegation Of Authority Housekeeping level changes. Housekeeping level changes. IV (4) Operational Supplies, Materials, Equipment & Services, Including Professional Service Consultants (Excluding Public Works Construction Contracts Or Professional Design Service Agreements) Housekeeping level changes. Housekeeping changes, including a re-ordering of Sections from lowest to highest dollar values. V (5) Professional Design Services Agreements Housekeeping level and other changes. In addition to housekeeping level changes, the layout of this section has been re-ordered due to the addition of new sections. V (6) Professional Design Services Agreements Section 5.03 Prequalification Program This section adds a prequalification program for various disciplines within the engineering field. The prequalification program will result in the establishment of a list of consultants who meet OCSD’s qualification criteria in various disciplines. Consultants on the established prequalified lists will be provided with access to proposing opportunities for specific projects. Proposing opportunities will consist of a Request for Proposal (RFP) process similar to the current process. The term of the list will be no greater than 3 years. This change will result in a broad outreach to the engineering consultant community for the purpose of identifying a pool of highly qualified firms that will offer OCSD the best overall service. SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 2 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE V (7) Professional Design Services Agreement Section 5.04 Major Capital Projects: Selection of Professional Design Consultants – Procedure Subsection G. Specialized Services This subsection addresses the situation where staff determines that there is only one qualified firm to perform services for a specific project with unique needs. The Staff Evaluation Committee may make a recommendation for award to that one firm to the appropriate Standing Committee when the estimated value of the proposed work is in an amount greater than $100,000. This is an increase of $50,000 from the existing DOA. This proposed change raises the threshold for sole source consultant procurements to be forwarded to the appropriate Standing Committee to $100,000. The increase simply makes the General Manager’s level of sole source authorization consistent with his existing $100,000 approval authority throughout the DOA. V (8) Professional Design Services Agreement Section 5.05 Facilities Engineering Project: Annual Budget Approval Facilities Repair Services added to the scope of Facilities Engineering consultant services. The existing DOA limits the scope of Facilities Engineering to public works projects. The Beyond 2012 reorganization incorporated Facilities Repair on non-public works projects into the scope of the Facilities Engineering division. The proposed change aligns the DOA with the Beyond 2011 reorganization as regards Facilities Engineering and Facilities Repair projects. V (9) Professional Design Services Agreement Section 5.06 Facilities Engineering or Facilities Repair Project: Prequalification Process and Task Order Management Section A. This proposed revision specifies that a prequalification process shall be used to establish a master list of consultants to perform the required design and professional services needed for Facilities Engineering and Facilities Repair projects. This change will result in a broad outreach to the engineering consultant community for the purpose of identifying a pool of highly qualified firms that will offer OCSD the best overall service. SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 3 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE V (10) Professional Design Services Agreement Section 5.06 Facilities Engineering or Facilities Repair Projects: Prequalification Process and Task Order Management Subsection E. Raises the annual fiscal year contract limitation for the Facilities Engineering/Facilities Repair consultants from $200,000 per year to $250,000 per year. An additional $50,000 per year, per consultant agreement has been added to fund design or professional services necessary for Facilities Repair projects. VI (11) Public Works Construction Contracts Housekeeping level changes. Housekeeping level changes. VI (12) Public Works Construction Contracts Section 6.01: Purpose and Scope. The language contains revised language to provide for changes to the California Public Contract Code relative to the issue of the informal bidding threshold. The statutory threshold for informal bidding was recently changed from $35,000 to $175,000. OCSD does not currently utilize informal bidding practices, but the flexibility to do so could be of benefit. VI (13) Public Works Construction Contracts Section 6.04: Prequalification of Contractors Seeking to Bid on Public Works Projects This section has been added to allow OCSD to establish a prequalification program for contractors seeking to bid on OCSD projects. The ability to prequalify contractors will be beneficial to OCSD to ensure that contractors have proven experience in specific scopes of work or specific work environments, meet financial, safety and other responsibility criteria. Contract awards will continue to be based on the lowest responsive, responsible bidder. SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 4 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE V (14) Public Works Construction Contracts Section 6.05: Design-Build This section has been added to allow OCSD to utilize the design-build method of project delivery in accordance with the requirements of the California Public Contract Code, as may be amended from time to time. This update is proposed to bring current Board and legislatively approved practice and the DOA into alignment. VII (15) Award Authorization Housekeeping level changes and reorganization of sections. Housekeeping level changes and reorganization of sections. VII (16) Award Authorization 7.01: All Purchase Orders, Agreements, Contracts, Amendments and Change Orders. This Section has been reorganized into A. Original Purchase Orders, Agreements and Contracts B. Amendments C. Change Orders to Public Works Contracts In the existing DOA, Section 7.01C “Amendments & Change Orders to Existing Agreements” identified change authorization for public works contracts entered into prior to July 1, 2007. The purpose was to address authorizations for public works contracts that did not have an established contingency. As of this point, all contracts have an established contingency, so this section is no longer needed. VII (17) Award Authorization 7.01: All Purchase Orders, Agreements, Contracts, Amendments and Change Orders C. Change Orders to Public Works Contracts C. Change Orders to Public Works Contracts Under the list of Delegated Authorized Authority, Staff Levels A, B & C are added as parties authorized to approve Change Orders within the approved project contingency. The levels of authorization are higher than Staff Levels A,B &C established in 7.01A Original Purchase Orders, Agreements and Contracts, and are noted below. Contracts Administration will now review all field change orders, rather than just changes in excess of $35,000. The purpose for delegating staff the authority to authorize changes in the work within the approved contingency is to expedite the processing of change orders, which will result in faster payments to contractors for changed work. Overall staff accountability will increase since individual staff members will be directly responsible for authorized changes in the work within their designated level, within the approved contingency. SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 5 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE VII (18) Award Authorization, Continued 7.01: All Purchase Orders, Agreements, Contracts, Amendments and Change Orders C. Change Orders to Public Works Contracts Staff Level 7.01A 7.01C [Original awards] [Changes to Public Works] C $ up to $2,000 Less than or = $5,000 B $2,001 - $5,000 $ 5,001 - $10,000 A $5,001 - $10,000 $ 10,000 - $25,000 Division Manager $10,001 - $25,000 Department Head/ Director $25,001 - $50,000 $25,001 - $50,000 Assistant General Manager/ General Manager $50,001 - $100,000 $50,000 up to approved contingency limit Standing Committee and Board level authorizations not changed. See above. VI (19) Award Authorization 7.02: Task Orders for Facilities Engineering and Facilities Repair Projects A. Under the Director of Engineering’s authorized authority, adds a limit of $50,000 per agreement per year for facilities repair projects, as previously discussed in Section 5.06, subsection E. The existing DOA limits the scope of Facilities Engineering projects to public works. The Beyond 2012 reorganization incorporated facilities repair for non-public works into the responsibilities of the Facilities Engineering Division. The proposed change aligns the DOA with the Beyond 2011 reorganization, and adds authorization of up to $50,000 per consultant agreement per year to the Director of Engineering for design or professional services associated with Facilities Repair. SUMMARY OF PROPOSED CHANGES TO THE DELEGATION OF AUTHORITY June 22, 2011 Page 6 ARTICLE TITLE DESCRIPTION OF CHANGE RATIONALE FOR CHANGE VII (20) 7.03 Public Works Projects C. Substitution of Subcontractors Adds a provision which authorizes the General Manager to approve and execute all contractor requested substitutions of subcontractors. The existing DOA was silent on the handling of subcontractor substitutions. The proposed change is consistent with the California Pubic Contract Code provides that an awarding body or its duly authorized officer may consent to subcontractor substitutions. This change will allow OCSD to process subcontractor substitutions in a more expedited fashion. VIII (21) Training, Meetings and Related Travel Expenses Housekeeping level changes. Housekeeping level changes. IX (22) Miscellaneous Housekeeping level changes. Housekeeping level changes. REVISION DATE 06/23/2011 RESOLUTION NO. OCSD 11-XX ESTABLISHING POLICIES AND PROCEDURES FOR: THE AWARD OF PURCHASE ORDERS AND CONTRACTS; PUBLIC WORKS CONSTRUCTION CONTRACTS; PROFESSIONAL SERVICES CONTRACTS; AND DELEGATION OF AUTHORITY TO IMPLEMENT SAID POLICIES AND PROCEDURES A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE COUNTY SANITATION DISTRICT (DISTRICT OR OCSD) ESTABLISHING POLICIES AND PROCEDURES FOR THE AWARD OF PURCHASE ORDERS AND CONTRACTS; AWARD OF PUBLIC WORKS CONSTRUCTION CONTRACTS; AWARD OF PROFESSIONAL SERVICES CONTRACTS; AND DELEGATION OF AUTHORITY TO IMPLEMENT SAID POLICIES AND PROCEDURES; AND REPEALING RESOLUTION NO. OCSD 07-04. i TABLE OF CONTENTS ARTICLE I: RECITAL OF FINDINGS .................................................... Page 1 Section 1.01: Findings: Declaration of Intent. ARTICLE II: TERMS AND DEFINITIONS ............................................... Page 2 Section 2.01: Terms and Definitions. ARTICLE III: DELEGATION OF AUTHORITY – GENERAL ................... Page 6 Section 3.01: Purpose and Scope. Section 3.02: Authorizing General Manager to Establish Rules and Guidelines. Section 3.03: Procedure for Delegation of Authority. A. Approval Levels. B. Co-Signatures. C. Procedural Requirements. D. Special Consideration for Extraordinary Projects/Events. Section 3.04: Purchasing System Adoption. Section 3.05: Contracts, Purchasing and Materials Management Division Delegated Authority. Section 3.06: Procurement Card Program. Section 3.07: Requisitions. Section 3.08: Cooperative Procurement. Section 3.09: Procurements: Emergency. Section 3.10: Procurements: Standardized Prices, Specialized Services, and Sole Sources. Section 3.11: Purchase Orders. Section 3.12: Procurements: Encumbrances of Funds. Section 3.13: Blanket Purchase Orders. Section 3.14: Surplus Supplies, Materials, and Equipment. Section 3.15: Sale of Real Property. Section 3.16: Recordkeeping. ARTICLE IV: OPERATIONAL SUPPLIES, MATERIALS, ..................... Page 13 EQUIPMENT & SERVICES, INCLUDING PROFESSIONAL SERVICES CONSULTANTS (EXCLUDING PUBLIC WORKS CONSTRUCTION CONTRACTS OR PROFESSIONAL DESIGN SERVICE AGREEMENTS) Section 4.01: Purpose and Scope. Section 4.02: Procurements: Bidding Requirements. Section 4.03: Bidding Procedure: Procurements Less than $5,000. ii Section 4.04: Bidding Procedure: Procurements Less than $50,000. Section 4.05: Bidding Procedure: Procurements Greater Than $50,000. Section 4.06: Procurements between $50,000 and $100,000. Section 4.07: Inspection and Testing. Section 4.08: Procurements: Negotiated Contracts. Section 4.09: Request for Proposal Procedure. ARTICLE V: PROFESSIONAL DESIGN SERVICE AGREEMENTS .... Page 19 Section 5.01: Purpose and Scope. Section 5.02: Retention of Professional Design Consultants. Section 5.03: Prequalification Program. Section 5.04: Major Capital Projects: Selection of Professional Design Consultants - Procedure. A. Request for Proposals. B. Staff Evaluation Committee. C. Proposals – Contents. D. Review of Proposals by Staff Evaluation Committee. E. Procurement and Negotiation of Agreement. F. Continuation of Services. G. Specialized Services. H. Agreement for Services. I. Conflict of Interest. Section 5.05: Facilities Engineering Projects: Annual Budget Approval. Section 5.06: Facilities Engineering or Facilities Repair Projects: Prequalification Process and Task Order Management. Section 5:07: Facilities Engineering Projects: Approval of Plans and Specifications. Section 5.08: Major Capital Projects: Scope of Work. Section 5.09: Major Capital Projects: Engineer’s Estimate; Approval of Plans and Specifications. ARTICLE VI : PUBLIC WORKS CONSTRUCTION CONTRACTS ........ Page 28 Section 6.01: Purpose and Scope. Section 6.02: Bidding Procedure: Public Works Construction Up to and Including $35,000 - Bidding Not Required. Section 6.03: Bidding Procedure: Public Works Construction Greater than $35,000. A. Notice Inviting Bids. B. Bidder’s Security. C. Bid Opening Procedure. D. Bid Equal or Less Than Construction Budget E. Bid Greater Than Construction Budget F. Rejection of Bids. G. Tie Bids. iii H. One Bid. I. No Bids. J. Emergencies. K. Surety Bonds. L. Cost Records. Section 6.04: Prequalification of Contractors Seeking to Bid on Public Works Projects. Section 6.05: Design-Build. ARTICLE VII: AWARD AUTHORIZATION ............................................. Page 32 Section 7.01 All Purchase Orders, Agreements, Contracts, Amendments and Change Orders: A. Original Purchase Orders, Agreements and Contracts. B. Amendments. C. Change Orders to Public Works Contracts. Section 7.02 Task Orders For Facilities Engineering and Facilities Repair Projects: A. Task Orders. Section 7.03 Public Works Projects: A. Close-Out Agreements. B. Notice of Completion. Section 7.04 Time Extensions. ARTICLE VIII: TRAINING, MEETINGS AND RELATED TRAVEL EXPENDITURES ............................................. Page 39 Section 8.01: Purpose and Scope. Section 8.02: General. Section 8.03: Policies and Procedures. ARTICLE IX: MISCELLANEOUS ........................................................... Page 40 Section 9.01: Noncompliance. Section 9.02: Severability. Section 9.03: Effective Date. Section 9.04: Repeal of Prior Resolution. Resolution No. OCSD 11-XX 1 of 40 REVISION DATE 06/23/2011 ARTICLE I RECITAL OF FINDINGS Section 1.01: Findings: Declaration of Intent. A. California Government Code Section 54202 requires that every local agency shall adopt policies and procedures, including bidding regulations, governing procurements of supplies, materials, equipment or services, and that procurements of supplies, materials, equipment or services by the local agency shall be in accordance with said duly adopted policies. B. California Government Code Section 54204 requires that if the local agency is other than a city, county, or city and county, policies provided for in Section 54202 of said Code shall be adopted by means of a written rule or regulation, copies of which shall be available for public distribution. C. In order to establish effective procedures for the procurement of supplies, materials, equipment or services and the letting of Public Works contracts at the best possible cost commensurate with quality and delivery needs, together with other relevant factors, to exercise positive financial control over procurements, and to clearly define authority for the procurement function, and to establish bidding procedures, a procurement system for OCSD beyond what is required by said Sections of the Government Code is desirable and in the best public interest. D. An effective, comprehensive organization needs an administrative structure with support procedures that are logical, efficient, well documented, are understood by the organization’s employees and members of the public, and that will ensure the highest principles of procurement for the acquisition of supplies, materials, equipment or services and the letting of Public Works contracts. The organization should also appropriately delegate authority to those persons and units having responsibility for these activities. E. The Board of Directors has determined that a delegation of authority structure provides transparency, consistency, and ensures ethical conduct, which will result in greater accountability to the public. Resolution No. OCSD 11-XX 2 of 40 REVISION DATE 06/23/2011 ARTICLE II TERMS AND DEFINITIONS Section 2.01: Terms and Definitions. A. “Amendment” shall mean a written agreement entered into and between OCSD and the Professional Design Service Consultant or Professional Services Consultant, properly executed, covering modifications to the Agreement and which may result in adjustments to the cost and/or period of performance. B. “Board of Directors” or “Board” shall mean OCSD’s governing body comprised of elected representatives from cities or agencies within OCSD’s service area. C. “Capital Facilities” shall mean those Public Works owned by OCSD that are currently in existence. D. “Capital Facilities Operational Projects” shall mean the routine, recurring, and usual work for the preservation or protection of any Public Works, as well as any minor repainting, landscape, maintenance, or work performed to keep, operate, and maintain OCSD’s water, power and wastewater disposal systems. This work shall include modification or repair, or the replacement of parts, equipment, and facilities. E. “Capital Improvements” shall mean those Public Works that are to be newly-erected or constructed by OCSD in the future. See Public Works. F. “Change Order” shall mean a written agreement entered into and between OCSD and the Contractor/Vendor, or unilaterally issued by OCSD, properly executed, covering modifications to the Contract, which may result in adjustments to the cost and/or period of performance. G. “Contract Documents” shall mean those documents identified and referenced in the Contract Agreement, General Conditions. H. “Competitive Bidding” shall mean the process and procedure whereby OCSD, in accordance with California Public Contract Code Section 20783, prepares Plans and Specifications for the construction of Public Works; publishes a Notice Inviting Bids (NIB); publicly opens all bids received at a fixed time; and subsequently awards a Construction Contract to the lowest responsive and responsible bidder. I. “Department” shall mean a primary business unit designation at OCSD consisting of Divisions and Subdivisions headed by a Director/Department Head. J. “Director/Department Head” shall mean that individual who is the highest level of authority in and who is responsible for the management of a Department. Resolution No. OCSD 11-XX 3 of 40 REVISION DATE 06/23/2011 K. “Division” shall mean secondary level business unit designation of a Department. L. “Emergency” shall mean a sudden, unexpected occurrence that poses a clear and imminent danger or requiring immediate action to prevent or mitigate the loss or impairment of life, health, property, or essential public services, in accordance with this Resolution. M. “Facilities Engineering Project” shall mean a miscellaneous capital improvement or facility modification, replacement, or repair project, where Professional Design Consultant services are estimated to be in an amount not to exceed $100,000 (inclusive of Amendments) for each project. N. “Facilities Repair Project” shall mean a miscellaneous maintenance project, or facility repair or replacement project, where the Project has been determined to be non-Public Works. O. “Force Account” shall mean work that is performed solely by OCSD employees which has a cost value, including labor, overhead, parts, and supplies, in an amount not to exceed $5,000 for each Project, in accordance with California Public Contract Code Section 20783, except as allowed in Subparagraphs (a) and (b) below. It does not mean work performed for OCSD by persons or an entity under contract to OCSD, even when said work may be ordered by OCSD as being outside or beyond the original contract Scope of Work. OCSD employees may perform work on contracts, without limitation on amount only, for one of the following reasons: (a) It is an emergency and performing the work with OCSD forces is more expedient; or, (b) The Board of Directors has rejected all bids and by a four-fifths vote declared that the work can be performed more economically by day labor. A written cost effectiveness analysis must be placed in the contract file. This Force Account provision shall not apply to sewerage maintenance or repair work. P. “General Counsel” shall mean the lead attorney or designee representing the legal interests of OCSD. Q. “Major Capital Projects” shall mean the construction, repair, modification, or rehabilitation of OCSD’s Capital Facilities, including treatment plants, trunk sewers, pump stations, ocean outfall, administrative and support facilities, and other facilities related to OCSD operations, where the cost of Professional Design and Professional Services Consultants are estimated to be in an amount in excess of $100,000 for any project. These projects may require Standing Committee or Board approvals. R. “Professional Consultant Services Agreement” shall mean a duly executed and legally binding contract between OCSD and a Professional Design Consultant of a Professional Services Consultant to provide the services as described below, including but not limited to the Terms and Conditions, Scope of Work and compensation. In the case of Professional Design Consultants, the Professional Resolution No. OCSD 11-XX 4 of 40 REVISION DATE 06/23/2011 Consultant Services Agreement form is typically used when the Professional Design Services Consultant provides follow-on services during the construction and commissioning phases of the project. S. “Professional Design Consultant” shall mean an individual or firm, as a non-OCSD employee, who is licensed, certified or registered by the State of California who provides engineering, architectural, environmental, land surveying, construction management, and other similar services which are those professional services associated with development and design for construction, alteration, or repair of Public Works, as well as incidental services that members of these professions, and those in their employ, may logically or justifiably perform, including studies, investigations, surveys, evaluations, consultations, planning, inspections, shop drawing reviews, sample recommendations, cost estimates, inspections, preparation of operation and maintenance manuals, and other related services, all of which must be incidental to OCSD awarding a contract for the construction of Public Works or Facilities Engineering or Facilities Repair Projects. T. “Professional Design Services Agreement” shall mean a duly executed and legally binding contract between OCSD and a Professional Design Consultant to provide the services as described above, including but not limited to the Terms and Conditions, Scope of Work and compensation. U. “Professional Services Consultant” shall mean an individual or firm, as a non-employee of OCSD (and other than a “Professional Design Consultant”), providing professional services to OCSD, such as, but not limited to, accounting and financial services, information technology, human resources consultation and advocacy, legislative evaluation, consultation and advocacy, evaluation of systems design related to wastewater treatment systems, scientific research and consultation, and miscellaneous general research and consultation. V. “Professional Services Agreement” shall mean a duly executed and legally binding contract between OCSD and a Professional Services Consultant to provide the services as described above, including, but not limited to the Terms and Conditions, Scope of Work and compensation. W. “Professional Design Services Task Order Agreement” shall mean a duly executed and legally binding contract between OCSD and a Professional Design Consultant to provide the services as described above, including, but not limited to the Terms and Conditions, Scope of Work and compensation. Under this form of agreement, work is ordered and controlled through the issuance of Task Orders. X. “Professional Services Task Order Agreement” shall mean a duly executed and legally binding contract between OCSD and a Professional Services Consultant to provide the services as described above, including, but not limited to the Terms and Conditions, Scope of Work and compensation. Under this form of agreement, work is ordered and controlled through the issuance of Task Orders. Y. “Public Works” shall mean all buildings, structures, facilities, improvements, or works that are owned or operated by OCSD for the benefit of the public and which were or are being constructed, altered, demolished, or repaired under Resolution No. OCSD 11-XX 5 of 40 REVISION DATE 06/23/2011 contract and paid for, in whole or in part, out of public funds in accordance with California Public Contract Code. Z. “Public Works Construction Contract” shall mean an agreement between OCSD and an individual, firm, corporation, partnership or joint venture, duly licensed in the State of California, for the furnishing of labor, materials, equipment, and permits, as deemed necessary for the erection, construction, alteration, repair, or improvement of wastewater collection, treatment and disposal facilities, and any other public building, structure, or improvement necessary to the operation of OCSD. Contracts in an amount greater than $35,000 shall adhere to the provisions of California Public Contract Code Section 20783, et seq., as may be amended from time to time and adopted by the Board. AA. “Purchase Order” shall mean a purchaser’s document used to formalize a purchase transaction with a Vendor. A Purchase Order, when given to a Vendor, should contain statements as to the quantity, description and price of the goods or services ordered; agreed terms as to payment, discounts, date of performance, transportation terms and all other agreements pertinent to the purchase and its execution by the Vendor. BB. “Requisition” shall mean a document making a demand for supplies or services and quoting proper authority for the demand, funds, delivery date, quantities, etc. CC. “Staff” shall mean the employees of OCSD. DD. “Standing Committees” shall mean the Steering Committee, Operations Committee and Administration Committee and any other committee so designated by the Board of Directors. EE. “Subdivision” shall mean a next level business unit designation of a Division. FF. “Task Orders” shall mean miscellaneous technical support services authorized under a Professional Design Services Agreement or Professional Services Agreement. The specific task order must have a defined budget, scope of services and schedule, and be completed within the total budget of the existing prime contract. GG. “Vendor” shall mean any company or individual from whom OCSD receives supplies or services including, but not limited to consultants, contractors, service providers, and suppliers. Resolution No. OCSD 11-XX 6 of 40 REVISION DATE 06/23/2011 ARTICLE III DELEGATION OF AUTHORITY - GENERAL Section 3.01: Purpose and Scope. In an effort to assist OCSD employees in performing their jobs at the highest level of efficiency, a delegation of authority structure will appropriately provide information regarding responsibility and ownership, hence, it will contribute to the efficiency and effectiveness of OCSD. Section 3.02: Authorizing General Manager to Establish Rules and Guidelines. The levels of authorization to award purchase orders, agreements and contracts to acquire services, including professional services, other services, supplies, equipment, materials and Public Works Construction Contracts, are specified in Article VII herein. The General Manager of OCSD is hereby authorized to establish rules and guidelines to implement Board policies and to delegate to Staff, signature authority to initiate the procurement process, as specified in Articles IV through VII herein. Section 3.03: Procedure for Delegation of Authority. The General Manager shall establish further procedures to implement delegated authority into the organization. These procedures establish the framework and boundaries within which a delegate can operate, and also provide management with a mechanism to evaluate implementation and hold the delegate accountable for his or her actions. A. Approval Levels. Upon delegation of authority by the General Manager, each Department Head shall be authorized to further delegate to respective employees within the Department. The delegation shall be effective upon the Department Head setting forth, in writing, the name of the delegated employee, the job position, and specific level of delegated authority as Staff Level A, B, or C, respectively (as set forth in Article VII below, as applicable), and filing it with the Contracts, Purchasing and Materials Management Manager. To commence the procurement process for acquisition of operational supplies, materials, equipment, services, Public Works contracts governed by state law, Professional Services Agreements, Professional Design Services Agreements, Professional Consultant Services Agreements. Amendments and Change Orders signature authority is hereby established as set forth in Article VII below. The functional authority level listed describes the highest level of signature approval needed. Intermediate management approval between the initiator/requestor and listed approval level must also be obtained. The General Manager may delegate authority for all purposes under this Resolution to a Department Head to act in the General Manager’s absence. Resolution No. OCSD 11-XX 7 of 40 REVISION DATE 06/23/2011 B. Co-Signatures. In addition to the signature of the Delegated Authority: 1. To ensure that all policies and procedures governing purchase orders and contracts are followed, all contracts and purchase orders will be signed by the Contracts, Purchasing and Materials Management Manager, or designee upon approval of the delegated authority specified in Section 7.01A. 2. All procurements for computer hardware, software, copiers, faxes, and communication equipment will be pre-approved by the Director of Finance and Administrative Services, or designee. C. Procedural Requirements. All policies and procedures adopted by the Board of Directors or promulgated by the General Manager governing the procurement of supplies, materials, equipment or services, will apply, and shall be complied with. Budgeted funds must be approved and available prior to the procurement of supplies, materials, equipment or services. Upon the identification of goods or services needed that are not originally budgeted, either a budget transfer request form must be completed demonstrating that adequate funds are available to cover the acquisition, or the Board of Directors must authorize a budget amendment, at which time, the item being acquired would fall into the budgeted category. D. Special Consideration for Extraordinary Projects/Events. The Board of Directors, at its discretion, may temporarily increase the General Manager’s procurement approval and Amendment/Change Order authority due to circumstances it finds critical to the operations of OCSD. In addition, the Board may also allow the replenishment of the General Manager’s Amendment/Change Order authority, once exhausted, back to its original level, if necessary. Section 3.04: Purchasing System Adoption. The procedures and authority set forth in this Resolution are intended to operate in concert with and to supplement the delegation of authority granted by the governing Board of Directors in the adoption of this Resolution. Full compliance with the provisions of all Articles in this Resolution is required. Section 3.05: Contracts, Purchasing and Materials Management Division Delegated Authority. There is hereby vested in the Contracts, Purchasing and Materials Management Division (hereinafter referred to as “Contracts Administration” or “Purchasing” or “Materials Management” where appropriate), under the general supervision and direction of the Director of Finance and Administrative Services, the authority for the procurement of supplies, materials, equipment or services; letting of Public Works Construction Contracts; Professional Services Agreements; Professional Design Services Agreements; Professional Consultant Services Agreements; and other procurement instruments; and the establishment of rules, procedures, and administrative policies relative thereto. The Director of Finance and Administrative Services may delegate or Resolution No. OCSD 11-XX 8 of 40 REVISION DATE 06/23/2011 assign any or all of the following duties to the Contracts, Purchasing and Materials Management Manager: A. To procure or contract for supplies, materials, equipment or services required by any Department or Division, in accordance with purchasing procedures prescribed by this Resolution; such administrative regulations for the internal management and operation of the Contracts, Purchasing and Materials Management Division; and such other rules and regulations as shall be adopted by the Board of Directors; B. To negotiate and recommend execution of contracts for the procurement of supplies, materials, equipment or services; for Professional Design Consultants and Professional Services Consultants; for construction of Public Works projects; and for the disposition of surplus property and by-products of the sewage treatment process; C. To submit to General Counsel for review or approval, as necessary, contracts, purchase orders, and other related documents. The Clerk of the Board shall be the designated custodian of all original executed copies of contracts, purchase orders, and other related documents which are approved by a Standing Committee or the Board of Directors. The Contracts, Purchasing and Materials Management Division shall be the designated custodian for non-Board/Committee awarded executed contracts; D. To discourage collusive bidding and obtain fair and open competition for all procurements and sales of assets; E. To prepare rules, regulations, procedures, and administrative policies, and revisions thereto, governing the procurement of supplies, materials, equipment or services; for the letting of Public Works Construction Contracts in accordance with the provisions of state law; and disposition of surplus property and by-products of the sewage treatment process; F. To prepare rules, regulations, procedures, and administrative policies, and revisions thereto, governing the warehousing and management of inventories; G. To keep informed of best practices and current developments in the fields of contracts, purchasing and materials management, including but not limited to prices, market conditions, new products and new project delivery methods; H. To prescribe and maintain such forms as are reasonably necessary for the implementation of this Resolution and other rules and regulations of OCSD; I. To review and advise on specifications to establish minimum standards for all procurements in accordance with best practices; J. To supervise the inspection of all supplies, materials, equipment or services procurements to ensure conformance with specifications; K. To provide for the transfer of surplus or unused supplies and equipment between Departments, as needed; Resolution No. OCSD 11-XX 9 of 40 REVISION DATE 06/23/2011 L. To have custodianship and control of all inventories and surplus property; M. To maintain a vendor database and records needed for the efficient operation of the Contracts, Purchasing and Materials Management Division; or N. To revise all records to reflect the sale, transfer, or reorganization of a Vendor’s business, or a change in the Vendor’s name for doing business. In such event of an assignment of the purchase order, agreement or contract by the Vendor, OCSD shall not be bound until it has given its consent in writing, which consent shall not be unreasonably withheld. An Amendment to the original purchase order, agreement or contract shall be prepared authorizing and consenting to the assignment and shall be executed by the General Manager, or designee on OCSD’s behalf. O. To advertise solicitations, set a due date, and receive all bids/proposals. Section 3.06: Procurement Card Program. OCSD has established a Procurement Card (“Procard”) Program allowing specifically authorized employees to procure goods and services with a total dollar value less than $5,000 maximum limit per transaction/per month (excluding Purchasing Staff), thereby eliminating the purchase requisition, purchase order, invoice, and check requirements for these procurements. Approval for use of a Procard must first be obtained from the Contracts, Purchasing and Materials Management Manager and appropriate Department Head. All employees authorized by the Finance and Administrative Services Department to use a Procurement Card shall do so only in accordance with OCSD’s Purchasing Card (Procard) Program, Policy 401-1-06. Section 3.07: Requisitions. All OCSD employees who need or require supplies, materials, equipment or services to carry out the defined duties of their positions, shall submit requisitions, in advance, for purchases to Purchasing or warehouse requisitions to the Warehouse, in accordance with the adopted rules, regulations, procedures, and policies of the Contracts, Purchasing and Materials Management Division. Usage of OCSD’s procurement cards shall be exempt from this requirement. Section 3.08: Cooperative Procurement. A. OCSD, through Purchasing, may participate in or sponsor, conduct, and/or administer a Cooperative Procurement Agreement for the acquisition of procured items or services with any other public agency purchasing unit, or public agency alliance, in accordance with an agreement between OCSD and the other public agency. B. OCSD, through Purchasing, may sell to, acquire from, or use any property (other than real property) belonging to another public agency, including the cooperative use of supplies or services. Resolution No. OCSD 11-XX 10 of 40 REVISION DATE 06/23/2011 C. Purchasing may, at its discretion, procure from another local, state or federal government agency, or cooperative purchasing organization within the United States following a competitive bidding process or negotiation that substantially conforms to OCSD’s procurement procedures, without obtaining bids and following the procedures set forth below, if the Contracts, Purchasing and Materials Management Manager determines an economic benefit. Goods or services procured through said contract shall contain a purchase clause allowing public agencies to make use of the contract. All contracts shall follow the delegation of authority outlined in Section 7.01. Procurements in an amount estimated to be greater than One Hundred Thousand ($100,000) Dollars require approval by a Standing Committee or Board of Directors. Section 3.09: Procurements: Emergency. Whenever an Emergency arises which is, or may be, a threat to the continued required operations of the wastewater treatment plants and facilities owned by OCSD, or when procurements are immediately necessary for the preservation of life or property, or to avoid a threat to the public health or safety, the Contracts, Purchasing and Materials Management Division may procure supplies, materials, equipment or services required for immediate use, in an amount greater than One Hundred Thousand ($100,000) Dollars without observing the procedures set forth in this Resolution. The General Manager or designee shall advise the OCSD Chair and/or Vice Chair, as appropriate, of the action taken, and such action shall be ratified by the Board of Directors at its next regular meeting. Section 3.10: Procurements: Standardized Prices, Specialized Services, and Sole Sources. A. The Contracts, Purchasing and Materials Management Division may make purchases of supplies, materials, equipment or services without observing the bidding and Board approval procedures of Article IV below when: 1. Items to be procured have a demonstrated uniformity in price; or 2. An Emergency arises which is, or may cause, a threat to the continued required operations of Reclamation Plant 1 or Treatment Plant 2; or 3. Procurements are immediately necessary for the preservation of life or property, or to avoid a threat to the public health or safety; or 4. The provider of goods or services is determined to be uniquely qualified to provide specialized goods or perform specialized services. 5. It is determined that there is a sole source provider that has goods and services available immediately that might not otherwise be available at such time purchasing procedures could be completed, and Staff determines such items are critical to OCSD’s operations; a. For sole sources greater than $100,000, the General Manager, or designee, shall advise the OCSD Chair and/or Vice Chair, as appropriate, of the action to be taken, and such action shall be ratified by the Board of Directors at its next regular meeting. Resolution No. OCSD 11-XX 11 of 40 REVISION DATE 06/23/2011 b. Sole sources between $50,000 and $100,000 shall be approved by the General Manager and reported to the Board of Directors quarterly. c. All sole sources shall require pre-approval from the requesting Department Head, the Contracts, Purchasing and Materials Management Manager and the Director of Finance and Administrative Services. Section 3.11: Purchase Orders. Procurements of supplies, materials, equipment or services shall be made by Purchase Order through use of a Requisition or by the use of a Procard, and may also require a formal written contract when determined necessary or appropriate by the Contracts, Purchasing and Materials Management Manager. All Purchase Orders or contracts will be executed by the Contracts, Purchasing and Materials Management Manager or as delegated by the Contracts, Purchasing and Materials Management Manager. Employees requisitioning supplies, materials, equipment or services shall be responsible that requisitions are in conformity with the spirit and intent of this Resolution and that no procurement has been separated into small procurements to evade any requirement of this Resolution. In accordance with OCSD’s Records Retention Policy, the Contracts, Purchasing and Materials Management Division shall retain contracts, Purchase Orders and material management documentation. Section 3.12: Procurements: Encumbrances of Funds. Except in cases of Emergency, no Purchase Order shall be issued for any supplies, materials, equipment or services unless there exists a sufficient budget item against which said procurement is to be charged, and which is not pledged towards any other specific procurement. Section 3.13: Blanket Purchase Orders. The Contracts, Purchasing and Materials Management Division may issue annual blanket purchase orders for recurring procurements of miscellaneous supplies, materials, equipment or services that: A. Are not carried in stock in OCSD’s warehouse because of economic considerations; B. Are stock items that have been designated as appropriate sole source acquisitions; C. Have been competitively bid because Purchasing determines it is in the best interests of OCSD to issue a blanket purchase order for inventory items; or D. Are for miscellaneous supplies, materials, equipment or services where such purchase may be procured from a single vendor during the budget year, without observing the procedures prescribed in Section 4.05 below when, in the Contracts, Purchasing and Materials Management Division’s discretion, it is determined Resolution No. OCSD 11-XX 12 of 40 REVISION DATE 06/23/2011 that such blanket purchase orders are at a cost favorable to OCSD and will result in a more efficient procurement of such items. Blanket purchase orders shall be in conformity with the spirit and intent of this Resolution. The Contracts, Purchasing and Materials Management Division shall, at the beginning of each budget year, post a list of such purchase orders and the estimated annual amount with the Director of Finance and Administrative Services. Section 3.14: Surplus Supplies, Materials, and Equipment. All Departments and/or Divisions shall submit to Purchasing a form as prescribed by the Contracts, Purchasing and Materials Management Division reporting on the condition of supplies, materials, and/or equipment which are no longer used or which have become obsolete or inoperable. Purchasing shall have the authority, as deemed appropriate by the Contracts, Purchasing and Materials Management Manager, to sell, exchange for, or trade in on new supplies, materials, and equipment, or dispose, as deemed appropriate, of all supplies, materials, and equipment which cannot be used by any other Department or Division, or which have become unsuitable for OCSD use. Section 3.15: Sale of Real Property. No negotiations concerning the sale or lease of real property of OCSD may be made without prior review by the Contracts, Purchasing and Materials Management Manager and General Counsel. No real property of OCSD may be sold or leased without prior approval of the Board of Directors. Section 3.16: Recordkeeping. A record of all sales of surplus property and by-products shall also be maintained by the Contracts, Purchasing and Materials Management Division upon or in which is maintained, the record of the bids received for the property or by-products sold, or if bids were not taken or received, a full explanation thereof. Such records shall be maintained in accordance with OCSD’s Records Retention Policy. Resolution No. OCSD 11-XX 13 of 40 REVISION DATE 06/23/2011 ARTICLE IV OPERATIONAL SUPPLIES, MATERIALS, EQUIPMENT & SERVICES, INCLUDING PROFESSIONAL SERVICES CONSULTANTS (EXCLUDING PUBLIC WORKS CONSTRUCTION CONTRACTS OR PROFESSIONAL DESIGN SERVICE AGREEMENTS) Section 4.01: Purpose and Scope. In order to establish efficient procedures for the procurement of supplies, materials, equipment and services, including Professional Services Consultants, at the best possible cost, commensurate with quality and delivery needs and other relevant factors; to exercise positive financial control over procurements; to clearly define authority for the purchasing function; and to establish bidding procedures pursuant to Section 54202 of the Government Code of the State of California, a purchasing system is deemed necessary. This Article does not apply to Professional Design Service Agreements, those Professional Consultant Services Agreements which are follow-on work to Professional Design Services Agreements, and Public Works Construction Contracts, which are defined and governed by Articles V and VI below. Section 4.02: Procurements: Bidding Requirements. Except as hereinafter provided, purchasing of supplies, materials, equipment or services, including Professional Services Consultants, shall be by bid procedures as set forth in this Article IV, when the procurement is estimated to have a value greater than Five Thousand ($5,000) Dollars; the supplies or services may be obtained from more than one Vendor; are not standardized as to price; and no Emergency exists. Section 4.03: Bidding Procedure: Procurements Less Than $5,000. Purchasing may procure supplies, materials, equipment or services, including Professional Services Consultants of a value in the amount of $5,000 or less, without observing the procedures prescribed in Section 4.04 when, in the Contracts, Purchasing and Materials Management Manager’s discretion, it is determined that observing such procedures would not result in a lower overall cost to OCSD. Record of such decision shall be fully stated in the purchase order file as to the reason therefor. Section 4.04: Bidding Procedure: Procurements Less Than $50,000. Procurements of supplies, materials, equipment or services, including Professional Services Consultants, of an estimated value in the amount of $50,000 or less on which bidding is not required by state law, may be made by Purchasing in the open market without observing the same procedures as prescribed by Section 4.05 below. The procedures to be used for these procurements are as follows: Resolution No. OCSD 11-XX 14 of 40 REVISION DATE 06/23/2011 A. Minimum Number of Bids. Open market procurement shall, whenever possible, be based on at least three (3) bids and shall be awarded to the lowest responsive and responsible bidder, and shall be by written contract or purchase order. If three (3) or more bids have been solicited but three (3) bids were not submitted, OCSD may award to the lowest responsive and responsible bidder if it can be determined that bids submitted are fair and reasonable. B. Solicitation of Bids. Bids shall be solicited by written requests to prospective vendors or purchasers by telephone, facsimile transmission, electronic bulletin board, and/or by public notice posted on a public bulletin board in the Purchasing office. C. Receipt of Bids. Bids shall be submitted to Purchasing, which shall keep a public record of all open market orders and bids in accordance with OCSD’s Records Retention Policy. D. Exceptions. Purchasing may procure supplies, materials, equipment or services, including Professional Services Consultants, without observing the procedures prescribed in Subparagraphs A, B, and C above, if supplies, materials, equipment or services, including Professional Services Consultants are only available from a sole source. All such procurements shall be approved by the Director of Finance and Administrative Services, the requesting Department Head, and the Contracts, Purchasing and Materials Management Manager. Section 4.05: Bidding Procedure: Procurements Greater Than $50,000. A. Award to Lowest Bidder. Except as otherwise provided in this Article IV, procurements of supplies, materials, equipment or services, including Professional Services Consultants, of an estimated value greater than $50,000 shall be by written contract or purchase order with the lowest responsive and responsible bidder (unless a Request for Proposal (RFP) solicitation instrument is utilized), pursuant to the procedures prescribed herein. B. Award Approval. Procurements of supplies, materials, equipment or services, including Professional Services Consultants, that are identified and have appropriate not to exceed contractual pre-approvals, as outlined in each Fiscal Year’s annual budget, to include capital equipment, shall be bid and awarded directly by the Contracts, Purchasing and Materials Management Manager, or as delegated by the Contracts, Purchasing and Materials Management Manager in accordance with the procedures in this Section 4.05. Supplies, materials, equipment or services, including Professional Services Consultants, not budgeted, or which exceed the Board or pre-approved amount, or subsequent increases to the contract above the original amount identified and approved in the budget year the contract was awarded (both pre-approved or Board approved), or which affect policy recommendations or ratifications, or are sole source or cooperative contracts exceeding $100,000, shall require Board of Directors’ approval prior to issuance or award of a purchase order or contract, except as provided in Section 7.01B. Resolution No. OCSD 11-XX 15 of 40 REVISION DATE 06/23/2011 C. Notice Inviting Bids. A Notice Inviting Bids (NIB) shall be published and include a general description of the articles or services to be procured or sold, shall state where bid forms and specifications may be secured, and the time and place for opening bids. 1. Published Notice. The NIB shall set a date for the opening of bids. The publication or posting of the notice shall be at least ten (10) days before the date of bid submittal. Notice may be published in a newspaper of general circulation, printed and published within OCSD’s jurisdiction; or by electronic bulletin board procedures designed to reach the industry or market of supply; or through OCSD’s Internet Web Site. 2. Bidder’s List. Purchasing may also solicit sealed bids, or receive bids electronically, from all qualified, responsible prospective Vendors whose names are on the Bidders List. 3. Bulletin Boards. Purchasing may also advertise pending procurements or sales by a notice posted on a public bulletin board in the Purchasing office, and by electronic bulletin board, as deemed appropriate by the Contracts, Purchasing and Materials Management Manager. D. Bidder’s Security. When deemed necessary by Purchasing, a bidder’s security may be prescribed in the contract specifications or in the NIB. Purchasing, or those assigned by Purchasing, shall maintain said bidders security. Bidders shall be entitled to the return of a bid security upon the full execution of an awarded contract or issuance of a purchase order to the successful bidder. A successful bidder shall forfeit its bid security upon refusal or failure to execute the contract within the prescribed time after the Notice of Award of Contract has been delivered to the bidder, unless OCSD is responsible for a delay in the prescribed time. The Contracts, Purchasing and Materials Management Manager may, on refusal or failure of the successful bidder to execute the contract, award it to the next lowest responsive, responsible bidder. If the Contracts, Purchasing and Materials Management Manager awards the contract to the next lowest bidder, an amount of the lowest bidder’s security equal to the difference between the low bid and the awarded bid shall be forfeited to OCSD, and the surplus, if any, shall be returned to the lowest bidder. E. Bid Opening Procedure. Sealed or electronically received bids shall be submitted to the Contracts, Purchasing and Materials Management Manager and/or Clerk of the Board, and shall be identified as a bid on the envelope or the electronic submittal. Bids shall be opened in public or electronically by the Contracts, Purchasing and Materials Management Manager, or designee, at the time stated in the public notices. OCSD is the official time keeper for submittal of bids. A tabulation of all bids received shall be available electronically for public inspection during regular business hours for a period of not less than thirty (30) calendar days after the bid submittal. In cases wherein the RFP instrument is utilized, all RFP’s will be opened, and only the name of the Proposer shall be read aloud or be able to be viewed electronically at the time and place set forth therein. F. Rejection of Bids. The Contracts, Purchasing and Materials Management Manager may reject any and all bids presented and re-advertise for bids. If all bids are rejected, the Contracts, Purchasing and Materials Management Manager Resolution No. OCSD 11-XX 16 of 40 REVISION DATE 06/23/2011 may declare that the materials or supplies may be acquired at a lower cost by negotiation in the open market and authorize the procurement in that manner. G. Tie Bids. If two or more bids received are for the same total amount or unit price (with quality and service being equal), and if the public interest will not be best served by a delay of re-advertising for bids, the Board of Directors or Contracts, Purchasing and Materials Management Manager may accept the one it chooses or accept the lowest bid made by negotiation with the tie bidders at the time of the award. H. Performance Bonds. Purchasing shall have the authority to require a Faithful Performance Bond, a Labor and Materials Bond, and/or a Warranty Bond, before entering into a contract in an amount as it shall find reasonably necessary to protect the best interests of OCSD. If Purchasing requires any of these Bonds, the form and amount of the Bond shall be described in the NIB and in the Contract Specifications. Section 4.06: Procurements between $50,000 and $100,000. Purchasing may award a contract to procure supplies, materials, equipment or services, including Professional Services Consultants, by using the procedures set forth in Section 3.10 above in an amount greater than $50,000 and less than $100,000, without obtaining bids and following the procedures all as more particularly set forth in Section 4.05 above when the Contracts, Purchasing and Materials Management Manager determines that: A. By purchasing immediately, it can avoid an imminent price increase or realize a substantial price discount that is available on a short-term basis only; or B. It can obtain supplies, materials, equipment or services, including professional services, immediately that might not otherwise be available at such time as purchasing procedures could be completed; or C. Said contract for supplies, materials, equipment or services, including professional services, includes Board of Directors’ approval for multiple one (1) year renewal periods at the District’s option. All such contracts shall not exceed the prescribed limit of renewal periods as defined by the Board of Directors and shall require the Contracts, Purchasing and Materials Management Manager’s approval; or D. The supplies, materials, equipment or services, including professional services, are only available from a sole source; or E. Whenever an Emergency arises which is, or may cause, a threat to the continued required operations of Reclamation Plant 1 or Treatment Plant 2, or when purchases are immediately necessary for the preservation of life or property, or to avoid a threat to the public health or safety. Resolution No. OCSD 11-XX 17 of 40 REVISION DATE 06/23/2011 Section 4.07: Inspection and Testing. The supplies, materials, equipment or services delivered, including performance or deliverables resulting from a Professional Services Agreement, shall be inspected to determine their conformance with the specifications set forth in the purchase order or agreement. Purchasing shall have the authority to request professional services, or to require chemical and physical tests of samples submitted with bids and samples of deliveries which are necessary to determine their quality and conformance with specifications. Section 4.08: Procurements: Negotiated Contracts. Notwithstanding other provisions of this Resolution, the Board of Directors may, when it appears in the best interests of OCSD, authorize the Staff to negotiate and award a contract for the procurement of supplies, materials, equipment or services, including Professional Services Consultants, without observing the procedures prescribed in Sections 4.04, 4.05 and 4.06 above. A. When such authorization has been granted for the procurement of supplies, materials, equipment or services, including professional services, of an estimated value in the amount of $100,000 or greater, the Staff shall obtain the concurrence of OCSD Chair and/or Vice Chair, as appropriate, prior to awarding such procurement. B. Whenever any contract for supplies, materials, equipment or services, including professional services, has been entered into between OCSD and a person or entity, and Purchasing determines that it is in the best interest of OCSD to continue said contract with such person or entity, Purchasing may, in its discretion, negotiate a renewal of such contract without observing the bidding procedures prescribed in Sections 4.04 and 4.05 above; provided, the original contract contains provisions for subsequent renewal periods, or has been approved and awarded by the Board of Directors; and/or has prior contractual pre-approval, as provided in Section 4.05. Section 4.09: Request for Proposal Procedure. As deemed appropriate by the Contracts, Purchasing and Materials Management Manager, a RFP solicitation process may be employed in lieu of the competitive bidding process. The RFP process may be used for goods or services that prove difficult to quantify or describe. Therefore, proposers are offered the opportunity to offer solutions. Award shall be based upon criteria which provide the “best value” received by OCSD, which is not solely determined by price. A. All Procurements – All Levels. Except as otherwise stated below, the RFP process shall follow bidding thresholds and procedures as outlined in Sections 4.04 through 4.05 above. B. Purchasing shall solely prescribe the RFP procedure and award criteria. OCSD’s RFP procedure shall be on file and available with the Contracts, Purchasing and Materials Management Manager or designee. Resolution No. OCSD 11-XX 18 of 40 REVISION DATE 06/23/2011 C. The Contracts, Purchasing and Materials Management Manager may solely prescribe and approve all RFP Evaluation team members. D. In order to avoid actual or perceived conflicts of interest, members of the Board of Directors are prohibited from participating in the RFP evaluation process, except in those instances where the potential provider shall directly serve and report to the Board or its respective Committee(s) or when approved to do so by the Board Chair. E. OCSD maintains a Conflict of Interest Code pursuant to California Government Code Sections 87100 et seq., which governs the activities and performance of duties of its Directors, officers, employees, or agents in the conduct of project work for OCSD. F. No Director, officer, employee, or agent of a Professional Services Consultant under contract with OCSD, shall solicit or accept rebates, kickbacks, favors, or other unlawful consideration from any individual or firm on behalf of any firm that may be potentially selected as a qualified firm to provide professional consulting services to OCSD. Acceptance of food and refreshments of a nominal value on infrequent occasions, and acceptance of gratuities or gifts shall not be deemed a violation of this provision, provided that if said items exceed $340, or the amount as fixed by California Government Code Section 89503, or California Code of Regulations Title 2, Section 18940.1, in a calendar year, the Director, officer, employee, or agent may be disqualified from participating in the decision pursuant to Article III of OCSD’s Conflict of Interest Code; and provided, further, that any Director, officer, employee, or agent, as a designated employee under OCSD’s Conflict of Interest Code, shall report any amount of gifts on his or her annual Statement of Economic Interests, as required by said Code. G. Any firm seeking selection under these procedures that violates OCSD’s Conflict of Interest Code shall be automatically disqualified. H. Any firm solicited to violate the Code must report said solicitation to the Board of Directors, or it will be automatically disqualified. Resolution No. OCSD 11-XX 19 of 40 REVISION DATE 06/23/2011 ARTICLE V PROFESSIONAL DESIGN SERVICE AGREEMENTS Section 5.01: Purpose and Scope. OCSD, in the interest of uniformity, fairness, and cost effectiveness desires to establish policies and procedures for the selection and procurement of professional engineering, architectural, environmental, land surveying, and construction management services. Section 5.02: Retention of Professional Design Consultants. This Resolution establishes a procedure to be followed in the selection and retention of Professional Design Consultants in the areas as defined in Article II, Definitions. Professional Design Consultants are those individuals or firms providing engineering, architectural, environmental, or land surveying services which are those professional services as defined in Article II, Definitions. Services for product testing are excluded. Section 5.03: Prequalification Program. Professional Design Consultants shall be selected based upon demonstrated qualifications to perform the work for which a particular consultant is best qualified. To satisfy this need, OCSD has established a prequalification program to identify qualified consultants for various disciplines. The prequalified consultants will be placed on the rotation lists for the term of no greater than three (3) years according to the following evaluation and prequalification process: A. A Request for Qualification (RFQ) for various disciplines shall be advertised. OCSD, in its sole discretion, shall determine the need for the type of disciplines to be included in each RFQ. The list of disciplines in the RFQ shall be developed by Engineering Staff and must be approved by the Director of Engineering (DOE), prior to submission to Contracts Administration for RFQ development. Contracts Administration shall be responsible for issuance of the RFQ and management of the procurement process. B. The RFQ shall outline qualification requirements that each participating firm must demonstrate in order to be placed on the prequalified list(s). C. A Staff Evaluation Committee shall review the Statements of Qualifications (SOQ) submitted by interested consultants. SOQ’s shall be reviewed for responsiveness, and then evaluated to determine if the firm is qualified. The Staff Evaluation Committee will present its recommendation list of qualified firms to the DOE and Contracts, Purchasing and Materials Manager for review and approval. Resolution No. OCSD 11-XX 20 of 40 REVISION DATE 06/23/2011 D. A rotation process shall be established and clearly identified in a RFQ to ensure fair and equal access to the proposing opportunities of all prequalified firms placed on the lists. The database of the prequalified firms and the rotation process shall be managed by Contracts Administration. E. List(s) as established by a RFQ shall be valid for a period not greater than three (3) years. Upon expiration of a list term, a new RFQ procurement shall be implemented as needed to establish new list(s) of prequalified consultants. F. The technical evaluation criteria for each RFQ shall be developed by Engineering Staff and approved by DOE or designee. Contracts Administration shall provide input into the evaluation criteria as to its objectivity to ensure fair and equal participation for all prospective Professional Design Consultants. The evaluation criteria shall be specific to each discipline and generally shall be based on the following: 1. Specialized experience, technical competence and past performance: Specialized experience, expertise, past performance, and competence that qualify a firm to perform services as they apply to each discipline required by a RFQ. 2. Personnel: Education, experience, training and skills of the key personnel of a firm. 3. Capacity to Accomplish Work: Capacity and resources to deliver the services as required by a RFQ within the specified period, sufficient number of qualified staff, resources such as computer hardware, software, special equipment and facilities as applicable . 4. Location/Local Environment: Location of the office(s) of the key personnel, familiarity with local government(s). In order to streamline the project implementation and procurement processes and reduce costs associated with individual procurements, it is the intent of OCSD to procure most Professional Design Consultant services as defined in Article II, Definitions by utilizing prequalified consultants. Therefore, in consideration of the above, the following procurement guidelines shall be used for individual procurements of Professional Design Consultant services as outlined in Section 5.04 below: The Board of Directors recognizes that due to the nature of OCSD’s business, special consideration may be given to projects with unique scopes of work which require professional design consultant services not available from consultants on the prequalified list(s). In such a situation, the Director of Engineering will provide a recommendation to the Contracts, Purchasing and Materials Management Manager for approval, clearly outlining the rationale and reasons necessitating an individual procurement in lieu of utilizing lists established by the prequalification program. The requirements for any such procurement shall be completed in accordance with the Selection of Professional Design Consultants procedure outlined in Section 5.04. Resolution No. OCSD 11-XX 21 of 40 REVISION DATE 06/23/2011 Section 5.04: Major Capital Projects: Selection of Professional Design Consultants – Procedure. For the employment of any Professional Design Consultant for major capital projects budgeted and approved by the Board of Directors, the procedure outlined below shall apply for solicitation of individual consultants from rotation lists as established by the prequalification program and for individual procurements when rotation lists are not utilized. A. Request for Proposals. Staff shall prepare a RFP or a RFQ, for the project Scope of Work which shall include a request for the firm’s qualifications, personnel capability, demonstration of firm’s capabilities, identification of personnel assigned to the project, estimate of number of hours for each aspect of the project, fee proposals, and conflict of interest disclaimer. The RFQ process may be used, at Staff’s discretion, to narrow the field of firms submitting proposals on the project. The RFQ process shall not be used for projects which utilize rotation lists, since pre-qualification requirement has been satisfied. OCSD shall maintain a comprehensive list of professional consultants’ demonstrated competence. Optionally, notice may be given by publication in professional journals or publications of general circulation in the event rotation lists are not used. B. Staff Evaluation Committee. A Staff Evaluation Committee of at least two (2) Staff members, as chosen by the DOE, shall review all submitted proposals and prepare a recommendation for selection of the best qualified consultant to the appropriate Standing Committee. Contracts Administration staff shall participate in the evaluation committee at all times. Contracts Administration shall be responsible for chairing the evaluation process to ensure compliance with OCSD policies and procedures, RFQ/RFP and contract requirements and applicable laws and regulations. The evaluation shall be as described in Section 5.04D below. In order to avoid actual or perceived conflicts of interest, members of the Board of Directors are prohibited from participating in the RFQ/RFP Evaluation process except in those instances where the potential provider shall directly serve and report to the Board or its respective Committee(s) or when approved to do so by the Board Chair. C. Proposals – Contents. Proposals submitted shall: 1. Acknowledge the scope of the project and extent of the services required. 2. Include a description of the firm’s qualifications for performing the proposed work. 3. In the case of a proposal for construction management services, each firm shall provide evidence that its personnel who will perform on-site responsibilities have expertise and experience in construction project design review and evaluation, construction mobilization and supervision, bid evaluation, project scheduling, cost-benefit analysis, claims review and negotiation, and general management and administration of a construction project. Resolution No. OCSD 11-XX 22 of 40 REVISION DATE 06/23/2011 4. Include past performance records of the firm. 5. Demonstrate the firm’s capabilities to complete the work within the time allotted. 6. Identify the specific key personnel to be assigned to the project. 7. Provide an estimate of the number of hours involved in each aspect of the Scope of Work for such personnel. 8. Be accompanied by a sealed fee proposal estimate which shall not be opened until the firm is selected as being qualified. Thereafter, it shall be the basis for procurement negotiations. The form of the fee proposal shall be as described in Section 5.04E.2 and Section 5.04E.3 below. 9. Contain a conflict of interest disclaimer. 10. Provide any other information required to properly evaluate the firm’s qualifications and familiarity with the types of problems applicable to the project. D. Review of Proposals by Staff Evaluation Committee. 1. The Staff Evaluation Committee, upon making a determination of the fully qualified firms, shall rank the firms considered, based upon the qualifications and in order of preference. 2. The Staff Evaluation Committee will, at its discretion, invite the firm(s) that is/are considered to be the best qualified for an oral interview. 3. The Staff Evaluation Committee shall review, and evaluate proposals, including interviews, if conducted, and determine and make recommendations to the appropriate Standing Committee as to which firm is deemed to be fully qualified to provide services sought by OCSD based on the firm’s demonstrated competence and qualifications. E. Procurement and Negotiation of Agreement. To determine the firm to be selected and the compensation for the services sought, the following procedures will be strictly adhered to: 1. The proposal for fees associated with the services, as submitted by the selected firm, shall be presented in sufficient detail to enable the Staff Evaluation Committee to adequately ascertain the level of effort associated with the Scope of Work and to determine whether the firm has thoroughly identified the efforts associated with the services and thoroughly understands the work required. 2. The Staff Evaluation Committee shall review the compensation requested by the firm in its fee proposal, which shall be compared with OCSD estimate developed by Engineering prior to proposal receipt. Resolution No. OCSD 11-XX 23 of 40 REVISION DATE 06/23/2011 3. The basis of the fee shall be cost plus fixed fee with a maximum amount; per diem rate(s) with a maximum amount; or a lump sum (fixed) fee. 4. If it is the decision of the Staff Evaluation Committee to use methods for compensation other than a cost plus fixed fee with a maximum amount; per diem rate(s) with a maximum amount; or a lump sum (fixed) fee, justifications for this decision shall be made by the Staff Evaluation Committee in its recommendation to the appropriate Standing Committee and/or the Board of Directors. 5. The Staff Evaluation Committee may enter into negotiations with the firm relative to any element of the firm’s proposal, including but not limited to the proposed level of effort and scope of work. 6. The final negotiated fee, as recommended to the appropriate Standing Committee and Board of Directors, shall be reviewed by the Staff Evaluation Committee for reasonableness and compliance with the requirements of the RFP and OCSD procedures. The Staff Evaluation Committee shall also review the final negotiated fee to ensure that it does not result in excessive profits for the firm. 7. If agreement is not reached, the negotiations should be terminated and similar interviews should then follow with the next ranked firm. 8. All such negotiations shall be on a strictly confidential basis, and in no case shall the compensation discussed with one firm be discussed with another. F. Continuation of Services. 1. In some instances when a qualified firm has satisfactorily completed one phase in the development of a project, Staff may, based on an outline and recommendation of the scope of additional work, request Board approval to negotiate with the same firm for additional services related to other phases of the project. In such an instance, the procedure of examining other firms for subsequent phases would be deemed not necessary or cost effective. In this instance, a Professional Consultant Services Agreement form may be used to contract for the services. 2. In the event that satisfactory negotiations for price cannot be concluded under these circumstances, negotiations should be terminated and the provisions set forth hereinabove for selection of another qualified firm would apply. G. Specialized Services. 1. In the event that specialized professional services are required, where it is determined that only one (1) qualified firm can best perform the services for a specific project for professional fees estimated to be in an amount greater than $100,000, the Staff Evaluation Committee will negotiate a Professional Design Services Agreement, Professional Consultant Services Agreement or Professional Services Agreement, make recommendations to the appropriate Standing Committee, and upon action by such Committee, present it to the Board of Directors for approval. Resolution No. OCSD 11-XX 24 of 40 REVISION DATE 06/23/2011 2. The basis of selection of the specialized firm or individual under Section 5.04G.1 above, along with the negotiated fee, shall be presented to the Board of Directors for consideration. H. Agreement for Services. 1. Upon approval by the Board of Directors of a negotiated agreement for professional services, a contract shall be executed in a form approved by General Counsel. 2. The contract shall include, but not be limited, to the following terms: (a) A statement on the scope of the project. (b) The basis and individual elements of the fees. (c) The basis for payment to the firm. (d) The time limits in which the services must be performed. (e) Provisions for fee adjustments, should there be changes in the Scope of Work. (f) If it is determined by the appropriate Standing Committee that OCSD may be caused to incur a penalty or liability, or suffer a loss because of the failure of the firm to perform the work within specified time limits, the contract shall include a clause setting forth penalties for such nonperformance or delayed performance, in amounts to be determined by the Standing Committee. (g) For projects exceeding $50,000 in fees or in other cases, as determined by OCSD, errors and omissions insurance in an amount recommended by General Counsel or OCSD’s Risk Manager (based upon engineering data from the Department Head) shall be required, unless the appropriate Standing Committee or Board of Directors, as the case may be, waives said insurance requirement. (h) For projects that involve engineering studies where a consultant is asked to provide a report not related or leading directly to a design project, the General Manager (based upon engineering data from the Department Head), in his discretion, may waive the requirement for the consultant to provide errors and omissions/professional liability insurance. I. Conflict of Interest. 1. OCSD maintains a Conflict of Interest Code pursuant to California Government Code Sections 87100 et seq., which governs the activities and performance of duties of its Directors, officers, employees, or agents in the conduct of project work for OCSD. Resolution No. OCSD 11-XX 25 of 40 REVISION DATE 06/23/2011 2. No Director, officer, employee, or agent of a Professional Design Consultant under contract with OCSD shall solicit or accept rebates, kickbacks, favors, or other unlawful consideration from any individual or firm on behalf of any firm that may be potentially selected as a qualified firm to provide professional consulting services to OCSD. Acceptance of food and refreshments of a nominal value on infrequent occasions, and acceptance of gratuities or gifts shall not be deemed a violation of this provision, provided that if said items exceed $340, or the amount as fixed by California Government Code Section 89503, or California Code of Regulations Title 2, Section 18940.1, in a calendar year, the Director, officer, employee, or agent may be disqualified from participating in the decision pursuant to Article III of OCSD’s Conflict of Interest Code; and provided further, that any Director, officer, employee, or agent, as a designated employee under OCSD’s Conflict of Interest Code, shall report any amount of gifts on his/her annual Statement of Economic Interests, as required by said Code. 3. Any firm seeking selection under these procedures that violates OCSD’s Conflict of Interest Code shall be automatically disqualified. 4. Any firm solicited to violate the code must report said solicitation to the Board of Directors or it will be automatically disqualified. Section 5.05: Facilities Engineering Projects: Annual Budget Approval. Upon approval by the Board of Directors of an annual budget OCSD’s Contracts, Purchasing and Materials Management Manager or designee, shall be authorized to solicit proposals from professional engineering, architectural, environmental, land surveying, and construction management firms to perform the required services for the approved Facilities Engineering or Facilities Repair Projects, as defined and prescribed herein. OCSD also recognizes that the scope of services and the qualifications of consultants can differ significantly between Major Capital Facilities Projects and Facilities Engineering and Facilities Repair Projects. The criteria set forth in Paragraphs C and D of Section 5.04 above may be waived by OCSD for Facilities Engineering or Facilities Repair Projects. Section 5.06: Facilities Engineering or Facilities Repair Projects: Prequalification Process and Task Order Management. A. The prequalification process as described in Section 5.03 shall be used to establish a master prequalified list of firms to perform the required professional design and professional services as required for Facilities Engineering and Facilities Repair projects. The number of firms on the master prequalified list shall be no less than five (5). The maximum number of prequalified firms on the master prequalified list shall be determined by the DOE or designee, based on OCSD’s projected work to ensure that there is sufficient number of firms to complete the scheduled projects. B. A list management process shall be established and clearly identified in a RFQ for Facilities Engineering and Facilities Repair design and professional services to ensure fair and equal access to the proposing opportunities of Resolution No. OCSD 11-XX 26 of 40 REVISION DATE 06/23/2011 all prequalified firms placed on the list. The database of the prequalified firms and the list management process shall be managed by Contracts Administration in accordance with the procedures as approved by the General Manager. The rotation process as referenced in Section 5.03D may be utilized when applicable. C. The term of the master prequalified list shall be no greater than three (3) years. D. Upon selection and approval of the master prequalified list by the Board, the Professional Design Services or Professional Services Consultant shall execute either OCSD’s Professional Design Services Task Order Agreement or Professional Services Task Order Agreement, whichever is applicable. The original term of the agreement shall be for a minimum of one (1) year but no greater than three (3) years, so as to not to exceed the term of the master prequalified list. The Agreement for each firm on the master prequalified list shall be maintained by Contracts Administration. Engineering Staff shall prepare the appropriate requisition documentation to ensure future payment to the consultants under contract on the master prequalified list. E. The maximum annual fiscal year contract limitation is $250,000 for each Professional Design Services or Professional Services Task Order Agreement awarded under the provisions of this Section. As a need for an individual specific Facilities Engineering or Facilities Repair Project arises, OCSD will implement the Agreement by issuing a Task Order identifying the specific project by name and number, and include the approved Scope of Work required of the consultant. Of the total annual not to exceed limitation for each Agreement, $50,000 is specifically reserved for Facilities Repair projects, (inclusive of Amendments). F. In order to award a Task Order, The DOE shall first obtain at least two (2) proposals from consultants on the list in accordance with the list management process as required by OCSD procedures. This requirement may be waived at the discretion of the DOE, where a determination is made that the subject work is unique such that only one (1) consultant is available to perform the work, or where significant time constraints or Emergency conditions dictate that one (1) consultant be solicited for a proposal. The DOE, or designee, shall review the proposals based on the best value approach which includes a combination of price and qualitative considerations. Qualitative considerations may include technical design, technical approach, quality of proposed personnel, and/or management plan. The award selection shall be based upon consideration of a combination of technical and price factors to determine the proposal deemed most advantageous and of the greatest value to OCSD. Based on the evaluations, the DOE is authorized to award the original Task Order, subject to the provisions of Section 7.01. G. Once the Professional Design Services or Professional Services Consultant is selected for the award of a Facilities Engineering or Facilities Repair project and the Task Order is executed by OCSD, the DOE shall issue the Notice to Proceed, if not already included in the Task Order. Resolution No. OCSD 11-XX 27 of 40 REVISION DATE 06/23/2011 Section 5.07: Facilities Engineering Projects: Approval of Plans and Specifications. The Board of Directors delegates to the Director of Engineering, as a Professional Registered Engineer, the authority to approve the design, plans, and specifications for the construction of a new or modified OCSD facility that is deemed a Facilities Engineering Project, as defined in Section 5.05 above. Section 5.08: Major Capital Projects: Scope of Work. A. For every project approved by the General Manager, the appropriate Standing Committee, or the Board of Directors, and for which outside professional consulting services are required, OCSD Staff shall develop a comprehensive Scope of Work. B. The Scope of Work shall define the extent of the services and the time required. Section 5.09: Major Capital Projects: Engineer’s Estimate; Approval of Plans and Specifications. A. For any project, if the engineer’s estimate for the construction contract, as provided by the DOE or OCSD’s consulting design engineer, is equal to or less than the approved construction budget for the project, Contracts Administration may proceed with advertising for bids. If the engineer’s estimate for the construction contract is greater than the approved construction budget for the project, the DOE shall submit the project to the appropriate Standing Committee for recommendation, and to the Board of Directors for approval, before Contracts Administration may proceed with advertising for bids. B. The design plans and specifications for the construction of new or modified Major Capital Projects shall be submitted to the Board of Directors for approval along with the lowest responsible bid. Resolution No. OCSD 11-XX 28 of 40 REVISION DATE 06/23/2011 ARTICLE VI PUBLIC WORKS CONSTRUCTION CONTRACTS Section 6.01 : Purpose and Scope. Public works contracts are herein defined as contracts with duly licensed contractors in the State of California for the furnishing of labor, materials, equipment, and permits, as deemed necessary for the erection, construction, alteration, repair, or improvement of wastewater collection, treatment and disposal facilities, and any other public building, structure, or improvement necessary to the operation of OCSD, in an amount greater than $35,000, as per California Public Contract Code Section 20783 et seq., as may be amended from time to time, and adopted by the Board. Section 6.02: Bidding Procedure: Public Works Construction Up to and Including $35,000 – Bidding Not Required. The provisions of California Public Contract Code Section 20783, as may be amended from time to time, and adopted by the Board, do not apply when the expenditure required for a public works construction project is $35,000 or less. Subject to approval by the General Manager, OCSD may establish appropriate policies and procedures for the contracting of such public works construction projects which shall meet the requirements of all applicable California Statutes. Section 6.03: Bidding Procedure: Public Works Construction Greater Than $35,000. Procedures for soliciting bids and awarding contracts for public works projects for more than $35,000 shall be in accordance with applicable provisions of California Public Contract Code Section 20783, as may be amended from time to time and adopted by the Board. A. Notice Inviting Bids. The NIB shall specifically describe, at a minimum, the following: location and Scope of Work to be performed, estimated cost; license requirement(s); time and location of the Pre-Bid Conference and Job Walk (if such meetings are conducted); where the Contract Documents may be obtained; bid security requirements, prevailing wage requirements; identification of any required sole sources, and the time and place for receiving and opening sealed bids. 1. Published Notice. Pursuant to California Public Contract Code Section 20783, the NIB shall set a date for the opening of bids. The first publication or posting of the Notice shall be at least ten (10) calendar days before the date for the opening of bids. The Notice shall be published at least two (2) times, not less than five (5) days apart, in a newspaper of general circulation, printed and published within the jurisdictional boundaries of the District. 2. Bidders’ List. The District may also solicit sealed bids from all qualified, responsible, prospective contractors whose names are on a Bidders’ List that may be maintained by OCSD. Resolution No. OCSD 11-XX 29 of 40 REVISION DATE 06/23/2011 B. Bidder’s Security. When deemed necessary by the Contracts, Purchasing and Materials Management Division, a Bidder’s Security may be prescribed in the Contract Documents and in the NIB. Bidders shall be entitled to the return of the bid security upon full execution by the successful bidder of an awarded contract by OCSD. A successful bidder may forfeit its bid security upon refusal or failure to execute the Contract within the prescribed time after the Notice of Award of Contract has been delivered to the bidder, unless OCSD is responsible for the delay in the prescribed time. The Board of Directors may, on the refusal or failure of the successful bidder to execute the contract, award it to the next lowest responsive, responsible bidder. If the Board of Directors awards the Contract to the next lowest bidder, an amount of the lowest bidder’s security equal to the difference in an amount between the low bid and the awarded bid shall be forfeited to OCSD, and the surplus, if any, shall be returned to the lowest bidder. C. Bid Opening Procedure. Sealed bids shall be submitted to the Contracts, Purchasing and Materials Management Manager or designee, or the Clerk of the Board, as identified in the Contract Documents, and shall be identified as a bid on the envelope. Bids shall be opened in public, at the time and place stated in the public notice. A tabulation of all bids received shall be available for public inspection during regular business hours for a period of not less than thirty (30) calendar days after the bid opening. D. Bid Equal or Less Than Construction Budget. For any project, upon receipt of bids for construction, if the lowest responsive bid of a responsible bidder is equal to or less than the approved construction budget for the project, the bid will be submitted to the Board of Directors. The Board of Directors may award a contract. E. Bid Greater Than Construction Budget. For any project, upon receipt of bids for construction, if the lowest responsive bid of a responsible bidder is greater than the approved construction budget for the project, Staff shall present the bid and a recommendation to the appropriate Standing Committee for review and recommendation to the Board of Directors. F. Rejection of Bids. In its discretion, the Board of Directors may reject any and all bids presented and re-advertise for bids. If, after the opening of bids, all bids are rejected, the Board of Directors, on a Resolution adopted by a four-fifths (4/5ths) vote, may declare that the work can be performed more economically by Force Account, if in accordance with applicable provisions of California Public Contract Code, or the materials or supplies can be obtained at a lower price in the open market and may have the work done in a manner stated in the Resolution in order to take advantage of this lower cost. G. Tie Bids. If two (2) or more responsive and responsible bids are received for the same total bid amount, and if the public interest will not be best served by a delay or re-advertising for bids, the Board of Directors may accept the one it chooses, or accept the lowest bid made by negotiation with the tie bidders at the time of the award. H. One Bid. When only one bid is received in response to a NIB, the bid may be considered and accepted if a determination is made that (1) the specifications used in the NIB were not unduly restrictive, (2) the required competition Resolution No. OCSD 11-XX 30 of 40 REVISION DATE 06/23/2011 was solicited and it could have been reasonably assumed that more than one bid would have been submitted, (3) the price is reasonable, (4) the bid is otherwise in accordance with the NIB, and (5) all processes and procedures have been followed in accordance with the Public Contract Code. I. No Bids. If no bids are received, OCSD may have the work done by Force Account, may re-advertise for bids pursuant to the procedures herein, or may select a contractor by negotiation. J. Emergencies. Whenever an emergency arises which is, or may be, a threat to the continued operation of the wastewater facilities, support facilities, and/or administrative facilities operated by OCSD, a contract for the repair or replacement of the public facility may be ordered by the General Manager without complying with the provisions of this Resolution or the California Public Contract Code. This authority is hereby delegated to the General Manager, or his designee, by the Board of Directors pursuant to the authority of California Public Contract Code. In such event, the General Manager shall advise the OCSD Chair and/or Vice Chair, as appropriate, of the action taken, and such action shall be confirmed by a four-fifths (4/5ths) vote of the Board of Directors at its next regular meeting. K. Surety Bonds. Contracts Administration shall require a Faithful Performance Bond and a Labor and Materials Bond. A Warranty Bond may be required before entering into a contract in an amount up to one hundred (100%) percent of the amount of the contract, as OCSD shall find reasonably necessary to protect its best interests. The form and amount of the Bond shall be described in the NIB, or elsewhere in the Contract Documents. Original Bonds for Public Works construction contracts shall be kept in the official OCSD file which is maintained by the Clerk of the Board, for Board or Committee awarded contracts, or by the Contracts, Purchasing and Materials Management Division for non-Board/Committee awarded contracts. L. Cost Records. Cost records shall be kept in the manner provided in Sections 4000 to 4007 inclusive, of the California Government Code. Section 6.04: Prequalification of Contractors Seeking to Bid on Public Works Projects. In accordance with the provisions of California Public Contract Code Section 20101 and as described in this section, OCSD may establish a program to pre-qualify contractors and subcontractors to bid on OCSD’s Public Works construction projects. Subject to approval by the General Manager, OCSD may establish appropriate policies and procedures for the implementation of such a pre-qualification program which shall meet the requirements of all applicable California statutes. Section 6.05: Design-Build. In accordance with the provisions of California Public Contract Code Section 20785 and as described in this section, OCSD may utilize an alternative procedure for the selection of qualified firms to perform work on Public Works construction projects utilizing the Design Build procedure. Pursuant to California Public Contract Code Resolution No. OCSD 11-XX 31 of 40 REVISION DATE 06/23/2011 Section 20785(c), this authority remains in effect until January 1, 2013, unless a later enacted statute deletes or extends that date. Subject to approval by the General Manager, OCSD may establish appropriate policies and procedures for the contracting of such Public Works design-build projects which shall meet the requirements of all applicable California statutes. Resolution No. OCSD 11-XX 32 of 40 REVISION DATE 06/23/2011 ARTICLE VII AWARD AUTHORIZATION Section 7.01: All Purchase Orders, Agreements, Contracts, Amendments and Change Orders. This Section 7.01 applies to all Purchase Orders, Agreements, Contracts, Amendments, and Change Orders entered into by OCSD. All delegated Staff shall be responsible for executing procurements or post award changes in conformity with the intent and spirit of this Resolution and shall ensure that no procurement or post award change has been separated into a smaller increments to evade any requirements of this Resolution. A. Original Purchase Orders, Agreements and Contracts. The award and execution of an original Purchase Order, Agreement or Contract on behalf of OCSD, shall be made in accordance with the following delegations of authority: Delegated Authorized Authorized Action Authority Staff Level C Authorization to approve budgeted procurements less than or equal to $2,000. Staff Level B Authorization to approve budgeted procurements from $2,001 through $5,000. Staff Level A Authorization to approve budgeted procurements from $5,001 through $10,000. Division Manager Authorization to approve budgeted procurements from $10,001 through $25,000. Department Head/ Authorization to approve budgeted Director procurements from $25,001 through $50,000. Assistant General Manager/ Authorization to review and approve General Manager budgeted procurements between $50,001 and an amount not to exceed $100,000. Items to be reported to the Board of Directors on a quarterly basis. Resolution No. OCSD 11-XX 33 of 40 REVISION DATE 06/23/2011 Standing Committees Authorization to approve original budgeted procurements over $100,000 up to $200,000. Authorization to approve Change Orders and Amendments within a contingency budget to be established by the appropriate Standing Committee for each individual Purchase Order, Agreement or Contract. In approving each Purchase Order, Agreement or Contract, the appropriate Standing Committee shall establish a contingency budget in an amount up to fifty percent (50%) of the original agreement price. The aggregate amount of Change Orders and Amendments approved by Staff shall not exceed the contingency budget established by the appropriate Standing Committee. If a Standing Committee sets a contingency budget at less than fifty percent (50%), it may later increase the contingency budget; provided, however, that the aggregate amount of Change Orders or Amendments shall not exceed fifty percent (50%) of the original agreement price. If no contingency budget is established at the time of contract award, any increase in the original agreement price shall be approved by the appropriate Standing Committee, within its authority. Board of Directors Authorization to approve original budgeted procurements over $200,000. Authorization to establish a contingency budget for Change Orders and Amendments for original procurements over $200,000. If no contingency budget is established at the time of contract award, any increase in the original agreement price shall be approved by the Board of Directors. The Board of Directors shall also approve any Change Orders or Amendments that combined with all prior Change Orders or Amendments exceeds the established contingency budget. Resolution No. OCSD 11-XX 34 of 40 REVISION DATE 06/23/2011 B. Amendments. The award and execution of Amendments, Purchase Orders, Agreements, and Contracts on behalf of OCSD shall be made in accordance with the following: Delegated Authorized Authorized Action Authority Department Head/ Authorization to make recommendations to Director the General Manager. Assistant General Manager/ Review recommendations of Department General Manager Head and approve Amendments provided that the total Purchase Order, Agreement, or Contract shall not exceed $100,000 (includes original contract and all Amendments). The Assistant General Manager/General Manager shall manage the expenditure of all approved contingency funds approved by the appropriate Standing Committee or the Board of Directors. The Assistant General Manager/General Manager shall be authorized to approve all Amendments for chemical contracts, unless the contract unit price has been changed from original Standing Committee/Board award. If the original chemical contract was approved in the budget pre-approval process, a unit price increase exceeding the unit price awarded in the budget pre-approval year requires Standing Committee/Board approval. Contracts awarded in the pre-approval process based upon a not to exceed amount, not unit price, may be increased up to the amount pre-approved in the budget year the contract was awarded. Chemical contracts are exempt. Resolution No. OCSD 11-XX 35 of 40 REVISION DATE 06/23/2011 Standing Committees Receive recommendations of the Assistant General Manager/General Manager to approve all Amendments that exceed the total contingency budget established at the time the original agreement is awarded, as may be revised from time to time by the Standing Committee, until such contingency budget is equal to or greater than fifty percent (50%) of the original agreement price. Board of Directors Receive recommendations of the Assistant General Manager/General Manager to approve all Amendments that exceed the total contingency budget established at the time the original agreement is awarded. C. Change Orders to Public Works Contracts. This Section 7.01C shall apply to “Public Works Construction Contracts”. All Change Orders must be reviewed by Contracts Administration for compliance with Contract, this Resolution, OCSD Policies and Procedures and applicable laws and regulations. Delegated Authorized Authorized Action Authority Staff Level C Authorization to approve Change Orders within approved project contingency valued less than or equal to $5,000. Staff Level B Authorization to approve Change Orders within approved project contingency valued from $5,001 through $10,000. Staff Level A Authorization to approve Change Orders within approved project contingency valued from $10,001 through $25,000. Department Head/ Authorization to approve Change Orders Director within approved project contingency from $25,001 through $50,000. Resolution No. OCSD 11-XX 36 of 40 REVISION DATE 06/23/2011 Assistant General Manager/ Review and approve changes within General Manager approved project contingency from $50,000 and above. The Assistant General Manager/General Manager shall manage the expenditure of all approved contingency funds approved by the appropriate Standing Committee or the Board of Directors. Recommend to the Standing Committee or Board of Directors, as applicable. Change Orders in excess of the authorized contingency amount must be approved by the Standing Committee or Board of Directors, as applicable prior to issuance. Standing Committee Receive recommendation of the Assistant General Manager/General Manager to approve increases to the original contingency amount as previously set by the appropriate Standing Committee not to exceed fifty percent (50%) of the original award price. Board of Directors Receive General Manager/Assistant General Manager’s or Standing Committee’s recommendation to approve Change Orders that exceed the contingency limits previously established by the General Manager, appropriate Standing Committee or Board of Directors. Approve any increases to the original contingency amount as previously set by the appropriate Standing Committee and as recommended by General Manager. Section 7.02: Task Orders for Facilities Engineering and Facilities Repair Projects. A. Task Orders. The award and execution of a Task Order shall be made in accordance with the following Delegation of Authority: Resolution No. OCSD 11-XX 37 of 40 REVISION DATE 06/23/2011 Delegated Authorized Authorized Action Authority Director of Engineering Authorization to evaluate proposals, negotiate and execute a Task Order and Amendments to Task Orders up to $75,000. This authorization is limited to $50,000 per agreement per year in the case of Facilities Repair Task Orders and Amendments. Assistant General Manager/ Receive recommendation of the DOE and General Manager approve each amendment to the Task Order between $75,000 and $100,000. When the total combined value of the Task Order and all amendments equals $100,000, the General Manager’s amendment authorization limit has been reached. Section 7.03: Public Works Projects. A. Close-Out Agreements. The approval and execution of an original Close-Out Agreement, if required in the Contract Documents, shall be made by the General Manager. B. Notice of Completion. The approval and execution of an original Notice of Completion shall be made in accordance with the following delegations of authority: Delegated Authorized Authorized Action Authority Director of Engineering Authority to approve and execute all Notices of Completion. C. Substitution of Subcontractors. Subcontractor substitutions requested by the Contractor shall be executed as prescribed in the Public Contract Code, Section 4107 and in accordance with the following delegation of authority: Delegated Authorized Authorized Action Authority General Manager Authority to approve and execute all subcontractor substitutions. Resolution No. OCSD 11-XX 38 of 40 REVISION DATE 06/23/2011 Section 7.04: Time Extensions. The approval and execution of all Time Extensions to Construction Contract shall be made in accordance with the following delegations of authority: Delegated Authorized Authorized Action Authority General Manager Authority to approve and execute construction contract time extensions. Resolution No. OCSD 11-XX 39 of 40 REVISION DATE 06/23/2011 ARTICLE VIII TRAINING, MEETINGS AND RELATED TRAVEL EXPENDITURES Section 8.01: Purpose and Scope. This Article sets forth the procedures and scope of delegated authority by which OCSD employees are authorized to incur expenses for budget-approved meetings and training in furtherance of OCSD business. Section 8.02: General. A. Training or meetings exceeding $500 will be itemized, as well as possible, in the approved budget. It is recognized that some meetings and training cannot be pre-planned during the budget process. B. All out-of-country travel (excluding Canada and Mexico) requires approval by the Board of Directors. C. Training or meetings requests exceeding $2,000 will be approved by the Department Director. D. Training or meetings requests less than $2,000 will be approved by the Division Manager. E. Established approvals must be received prior to arrangements for meetings or training being made. Section 8.03: Policies and Procedures. All policies and procedures governing training or meetings, such as the use of OCSD forms and justification, will be followed. Resolution No. OCSD 11-XX 40 of 40 REVISION DATE 06/23/2011 ARTICLE IX MISCELLANEOUS Section 9.01: Noncompliance. Any transaction failing to comply with this Resolution in any respect is voidable in the discretion of the Board of Directors, and any employee willfully and knowingly violating any provision of this Resolution may be subject to disciplinary action. Section 9.02: Severability. If any section, subsection, subdivision, sentence, clause, or phrase of this Resolution is for any reason held to be unconstitutional or otherwise invalid, such invalidity shall not affect the validity of the entire Resolution or any of the remaining portions thereof. The Board of Directors hereby declares that it would have passed this Resolution, and each section, subsection, subdivision, sentence, clause, and phrase thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, or phrases be declared unconstitutional or otherwise invalid. Section 9.03: Effective Date. This Resolution No. OCSD XX-XX shall take effect _______________, upon adoption by the Board of Directors. Section 9.04: Repeal of Prior Resolution. Resolution No. OCSD 07-04 is hereby repealed in its entirety. PASSED AND ADOPTED at a regular meeting of the Board of Directors held ___________________. date _______________________________ CHAIR ATTEST: ________________________________ Clerk of the Board