Report 2013-302/2013-303 Recommendation 13 Responses

Report 2013-302/2013-303: Judicial Branch Procurement: Semiannual Reports to the Legislature Are of Limited Usefulness, Information Systems Have Weak Controls, and Certain Improvements in Procurement Practices Are Needed (Release Date: December 2013)

Recommendation #13 To: Administrative Office of the Courts

The AOC should revise the judicial contracting manual to require judicial entities to maintain documentation on their determinations of fair and reasonable pricing for purchases under $5,000.

Annual Follow-Up Agency Response From November 2016

As noted in our response from December 2014, the Judicial Council of California's (Judicial Council) contracting manual is consistent with both the Public Contract Code and the State Contracting Manual. The Judicial Council respectfully declines to implement this recommendation and is pleased that the State Auditor's more recent reviews have yielded only a minimal number of audit findings.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

Public Contract Code (PCC) section 19206 requires the Judicial Council (formerly the AOC) to adopt a judicial contracting manual that is "consistent with" the PCC and "substantially similar" to the State Administrative Manual and the State Contracting Manual (SCM).

The SCM states at volume 1, section 5.90: "Contracts under $5,000 are not required to be competitively bid (PCC section 10335). However, agencies should obtain price quotes if there is a reason to believe a response from a single source is not a fair and reasonable price. Cost justification should be documented."

Chapter 5, section 5.1 of the judicial contracting manual states in part: "JBEs may purchase non-IT goods, non-IT services, or IT goods and services that cost less than $5,000 without conducting a competitive procurement so long as the Buyer determines that the pricing is fair and reasonable. The Buyer should include documentation on fair and reasonable pricing in the procurement file."

Consistent with the PCC, the judicial contracting manual and the SCM require a determination of fair and reasonable pricing for contracts under $5,000. The judicial contracting manual provides that fair and reasonable pricing for goods and services under $5,000 "should be documented," similar to the plain language of the SCM.

The Judicial Council (formerly the AOC) views the judicial contracting manual to be not only consistent with the PCC in this regard but also substantially similar to the SCM and declines to implement the recommendation.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

The SCM provides that when "should" is used, it is a requirement that needs to be followed unless the agency has a good business reason for the variance. However, the judicial contracting manual notes that when the word "should" is used, compliance is not mandatory, but is favored unless there is a good business reason for the variance. While the Judicial Council may deem the language in the judicial contracting manual as "substantially similar" to that in the SCM, our audit revealed that, in practice, judicial entities did not consistently maintain documentation that the price they paid was fair and reasonable for procurements under $5,000. We therefore recommended that the AOC revise the judicial contracting manual to require judicial entities to maintain documentation on their determinations to justify the price paid for the good or service. As we stated in our report, until the judicial contracting manual requires this documentation, the judicial branch risks being unable to demonstrate whether entities are obtaining a fair and reasonable price on procurements under $5,000.

6-Month Agency Response

Consistent with the previous response, the State Auditor's request to revise the Judicial Branch Contracting Manual in section 5.1 from 'should' to 'require' documentation in file for fair and reesonable pricing will be considered in the process for updating the manual this year.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

As a practical and operational matter, procurement files for non-competitive procurements under $5,000 would generally contain substantiation of fair and reasonable pricing and the Evaluation Team would document the evaluation and selection process for competitive procurements. The AOC will nonetheless, and most certainly, address the Auditors recommendation with other judicial entities and the Advisory Committee on Financial Accountability and Efficiency for the Judicial Branch, before a further revision of JBCM is submitted to the Judicial Council for approval consistent with the Auditors recommendation. The next anticipated JBCM revision will be effective 1/1/2015.

The JBCM (version effective 1/1/14) states at section 5.1: The Buyer should include documentation on fair and reasonable pricing in the procurement file. The should indicates reasonable discretion as does the Auditors recommendation.

California State Auditor's Assessment of 60-Day Status: Pending

Although the AOC is planning on addressing this recommendation, it has yet to revise the judicial contracting manual to require judicial entities to maintain documentation on their determinations of fair and reasonable pricing for purchases under $5,000. Further, the AOC's response asserts that the "should" in our recommendation indicates reasonable discretion in whether it needs to revise its judicial contract manual. To clarify, the recommendation should by no means be contused as discretionary. Rather, the recommendation will not be considered fully implemented until the AOC revises the judicial contracting manual to require judicial entities to maintain documentation on their determinations of fair and reasonable pricing for purchases under $5,000.

All Recommendations in 2013-302/2013-303

Agency responses received are posted verbatim.