2020-09-02 CMS BOSS SUP Recommendation~1.pdf

TO: Ellen H. Daley, Chief Procurement Officer for General Services

FROM: Barbara K. Myers, Sole Source Hearing Officer

DATE: October 13, 2020

SUBJECT: September 2, 2020 Sole Source Hearing Recommendation

On September 2, 2020, I presided as hearing officer over a hearing to consider comments regarding the following agency determination to contract on a sole source basis:

Agency: Illinois Department of Central Management Services (CMS), Bureau of Strategic

Sourcing (BOSS)

Vendor: Shelby County Community Services, Inc.

Brief Description: State Use Program joint purchasing master contract for Trash Can Hamper

Liners

State Use Program joint purchasing master contract for disposable paper, foam, and plastic products

Procurement Bulletin Reference: B-16549 (not to exceed $1,011,451)

B-16646 (not to exceed $4,579,167.86) Factual Background:

Section 45-35 of the Illinois Procurement Code permits agencies to procure certain supplies and services from qualified not-for-profit agencies for persons with significant disabilities

“without advertising or calling for bids.” This is known as the State Use Program.

On August 15, 2019, the CPO-GS issued CPO Notice 2020.01, which set forth a way for agencies to procure joint purchase master contracts (JPMCs) via the State Use Program. CPO

Notice 2020.01 instructed agencies to submit a proposed State Use JPMC to the State Use

Committee and request the State Use Committee review the proposed pricing and, provided the

Committee determines the pricing is fair, to approve the contract. The agency then must use the sole economically feasible source method of procurement to publish notice of the JPMC. The

CPO’s rationale for this method is that a qualified not-for-profit agency for persons with significant disabilities is “a sole economically feasible source due to the organization’s employment and empowerment of persons with disabilities.”

On July 29, 2020, CMS-BOSS received the State Use Committee’s approval for two State

Use JPMCs: B-16549, which is a State Use JPMC for trash can hamper liners, and B-16646, which is a State Use JPMC for disposable paper, foam, and plastic products. The State Use Committee determined the prices for the JPMCs were fair and reasonable and that the contracts would provide

22 persons with disabilities employment and job training.

CMS-BOSS published sole source justification forms (SSJFs) for the JPMCs on August

19, 2020. In the SSJFs, CMS-BOSS wrote that Shelby County Community Services, Inc. is the sole economically feasible source for these items because it is the only vendor approved by the

State Use Committee to provide them.

Mr. Mark Shapiro of Industrial Soap Company requested the hearing.

Summary of Hearing:

The hearing was held remotely via Webex. The notice of intent to contract on a sole source basis as well as the sole source justification form (SSJF) and Industrial Soap Company’s request for a hearing were incorporated into the record. The following summary incorporates and paraphrases several back-and-forth exchanges.

1. Testimony of Will Stephens

Will Stephens of CMS testified that CMS determined contracting for the items at issue with a qualified not-for-profit agency was in the best interests of the State and that section 45-35 of the Code permits CMS to enter into such contracts. He further testified that B-16549 will provide employment and job training for twelve people with disabilities. Mr. Stephens stated the

State Use Committee reviewed the pricing for the proposed JPMCs and found it to be fair and reasonable. Mr. Stephens testified that CMS was using the sole source procurement method for the sake of transparency and to meet the requirements of the Governmental Joint Purchasing Act

(30 ILCS 525). He also pointed out that section 1.4535(f) of the administrative rules for the Chief

Procurement Officer for General Services prohibits protests of an agency’s decision to purchase from a sheltered State Use workshop rather than issuing a competitive solicitation. Mr. Stephens stated the actual estimate for B-16646 is $1.998 million, not $4.5 million, because the proposed contract is only for one year.

2. Testimony of Mark Shapiro

Mark Shapiro, CEO of Industrial Soap Company, testified in opposition to the proposed sole source JPMCs. Mr. Shapiro indicated he was sensitive to the State’s desire to provide work to people with disabilities. He testified he researched these contracts and found that Shelby County

Community Services manufactures the hamper liners, but he believes the agency purchases about

80% of the items for the disposable foam and plastics contract from the same outside sources as wholesale distributors like Industrial Soap Company. Mr. Shapiro testified his company had the disposable foam and plastic item contracts for five years, and the proposed JPMC is almost identical. He indicated he reviewed the pricing and believes the State could save close to $1 million over time if these items were not passing through two entities (i.e., wholesalers and Shelby County

Community Services. Mr. Shapiro opined that CMS should not have compared Shelby County

Community Services’ pricing to retail prices (from retailers like Quill and Walmart) because the proper comparison would be to wholesale pricing (from retailers like US Foods or Sysco). Mr.

Shapiro further stated he thought the State could save about 21% on the hamper liners, so the State should consider procuring that contract competitively.

Applicable Statutes and Rules

“Sole economically feasible source procurement is permissible when only one supplier is deemed economically feasible.” 44 ILL. ADMIN. CODE 1.2025(b). A hearing on a proposed sole source contract must be held if an interested party submits a written request for one subject to the

CPO-GS Rules. 30 ILCS 500/20-25(a); 44 ILL. ADMIN. CODE 1.2025(c), (d).

“An agency's decision to purchase from a [State Use] sheltered workshop rather than issuing a competitive solicitation is not protestable.” Id. at 1.4535(f).

Analysis and Recommendation

I recommend this sole economically feasible source be approved because, while it is before me procedurally as a sole economically feasible source contract, it is ultimately the result of CMS’s decision to purchase from a State Use vendor, and the CPO-GS does not permit a protest of that decision. Id. A request for a hearing on a proposed sole source contract is not a protest under section 1.5550 of the CPO-GS Rules (44 ILL. ADMIN. CODE 1.5550). However, it serves a similar function. Members of the public may submit protests to object to an agency’s proposed specifications for a contract. 44 ILL. ADMIN. CODE 1.5550(a)(1). Likewise, members of the public may request a hearing to object to an agency’s proposed sole source contract. 1.2025(c), (d);

1.5740(c).

Industrial Soap Company objects to CMS’s decision to use a State Use vendor rather than issuing a competitive solicitation for these JPMCs. CMS’s decision is not protestable. The only reason CMS’s decision is subject to a hearing is CPO Notice 2020.01, which exists to provide a mechanism for agencies to use State Use vendors for JPMCs. In that Notice, the CPO-GS has deemed State Use vendors to be a sole economically feasible source for State Use JPMCs because of State Use vendors’ unique nature and service to the community. Moreover, Section 45-35 of the Procurement Code and section 1.4535 of the CPO-GS Rules require the State Use Committee to approve proposed State Use Program contracts. The State Use Program reviewed the proposed pricing for these JPMCs and approved the contracts – and, as the SSJFs point out, Shelby County

Community Services is the only vendor the State Use Committee has approved for these contracts.

In that sense, it is the sole source. Neither the Procurement Code nor the CPO-GS Rules clearly permit protests of or objections to the State Use Committee’s approval of a contract. Even if such protests were permitted, some of the price disparity Industrial Soap points to might not exist, as

Industrial Soap appears to have based its analysis on a multi-year contract, and these contracts are only for one year.

Based on the foregoing, I find the justification for this sole economically feasible source procurement to be sufficient, and I recommend that the CPO-GS approve the JPMCs with Shelby

County Community Services.