EXECUTIVE MANAGEMENT AND AUDIT COMMITTEE

EXECUTIVE MANAGEMENT AND AUDIT COMMITTEE

APRIL 18, 2002

SUBJECT: THE Metro PROCUREMENT POLICIES AND PROCEDURES MANUAL

ACTION: APPROVE REVISION TO THE Metro PROCUREMENT POLICIES AND PROCEDURES MANUAL

RECOMMENDATION

Approve a revision to the Metro Procurement Policies and Procedures Manual (PPPM) to require contractors to certify requests for payment, as set forth in Attachment A.

ISSUE

The Board of Directors established that changes to the PPPM be presented to the Executive Management and Audit Committee and the Board in a clear and concise request for approval. The current change represents the sixth requested Board action on the PPPM since 1997. This change should augment the Metro’s ability to take appropriate legal action against contractors who submit false claims to the agency.

POLICY IMPLICATIONS

The Federal False Claims Act has proven to be an effective tool in fighting contract fraud and other types of fraud perpetrated against the federal government. California has its own version of the False Claims Act. Both Acts allow the Metro to recover three times the amount of damages sustained by the Metro for each false claim submitted to it.

One of the key issues the Metro faces in recovering under the Acts is to demonstrate that a contractor knowingly submitted a false claim. The proposed policy and certification make clear that submission of an invoice is a claim and puts the contractor on notice of the Acts and the penalties for violation.

The proposed change will help contractors comply with the law and will aid the Metro in recovering rightful damages under both the federal and state laws.

The Board has the option to disapprove the proposed revision to the PPPM. However, the proposed revision is made with the intent of increasing the ability of the Metro to successfully prosecute false claims by Metro contractors.

There is no appreciable quantifiable increased cost to the Metro relating to the implementation of this change.

The Board approved the Procurement Policies and Procedures Manual in July 1997. Since that time, there have been five occasions where staff has requested and received Board approval for changes to the PPPM. More specifically, in July 1999, the Board approved a revision to the CEO contracting authority. In March 2000, the Board approved four additional changes to the PPPM. Six changes occurred in the February 2001 Board action. In September 2001, the Board approved a significant enhancement of the PPPM. In March 2002, the Board approved revisions to the PPPM to comply with changes in California law and 49 CFR Part 26. This recommendation, if approved, would be the sixth Board action on revisions to the PPPM in five years. Effective July 1, 2002, all new services and construction contracts above the small purchases threshold will include a contract clause requiring invoice certification. Metro Procurement staff will also instruct Accounts Payable to return invoices that do not comply with the contract clause requiring certification.

The approved revision will be reflected in the updated PPPM within 30 days from Board approval.

In view of rapid advances in industry processes, staff anticipates a sustained procedural review and update effort in order to keep the manual current. As requested by the Metro Board, we will continue submitting future changes in the PPPM for Board approval.

Prepared by: Rudy LeFlore, Director, Procurement Process Quality and Business Planning