Review of the Procurement Services Department of the Houston Independent School District October 2011

Dr. Terry Grier, Superintendent of the Houston Independent School District (HISD), asked the Council of the Great City Schools (CGCS)1 to provide a high-level management review of the school systems Procurement Services Department.2 Specifically, he requested that the Council Review and evaluate the organization, leadership and management, and operations of the districts Procurement Services Department. Develop recommendations that would help the department achieve greater operational efficiencies and effectiveness.

In response to this request, the Council assembled a Strategic Support Team of senior procurement managers with extensive experience in other major city school systems across the country. The team was composed of the following individuals. (Appendix A provides brief biographical sketches of team members.) Robert Carlson, Project Director Director, Management Services Council of the Great City Schools David Koch, Principal Investigator Chief Administrative Officer (Retired) Los Angeles Unified School District Joseph A. Gomez Assistant Superintendent, Procurement Management Services (retired) Miami-Dade County Schools Arthur S. Hanby, Jr. Strategic Sourcing and Contracts Officer San Diego Unified School District
1

The Council has conducted over 200 instructional, management, and operational reviews in more than 50 bigcity school districts over the last 12 years. The reports generated by these reviews are often critical, but they also have been the foundation for improving the operations, organization, instruction, and management of many urban school systems nationally. In other cases, the reports are complimentary and form the basis for identifying best practices for other urban school systems to replicate. (Attachment E lists the reviews that the Council has conducted.) 2 The Council previously conducted a review of the HISD Facilities Services department in May 2010, its Capital Facilities program in July 2010, and its Information Technology department in January of 2011. This procurement review does not constitute a forensic audit but instead is a high-level review of department operations.

Review of the Procurement Services Department of the Houston Independent School District

Duane Johnson Chief Procurement Officer Los Angeles Unified School District Christopher Steele Senior Director, Purchases & Supply Norfolk Public Schools The Councils team conducted fieldwork for the project during a four-day site visit to Houston on October 9-12, 2011. The general schedule for the site visit is described below. (A more detailed working agenda for the site visit is presented in Appendix B.) The team met with the Houston superintendent, chief financial officer, chief of staff, controller, and interim general manager of procurement services on the first day of the site visit to discuss expectations and objectives for the review and to make final adjustments to the work schedule. The superintendent described his concerns about the districts procurement function and identified areas where he wanted the team to focus its attention. The team used the first two full days of the site visit to interview staff members and review documents, reports, and data provided by the district. (Lists of individuals interviewed and materials reviewed by the team are presented in Appendices C and D.)3 The final day of the visit was devoted to synthesizing and refining the teams findings and recommendations, and debriefing the superintendent, chief financial officer, chief operating officer, chief of staff, and controller. The Council sent a draft of this report to team members for their review to ensure its accuracy and to obtain their concurrence with the final recommendations. This management letter contains the findings and recommendations designed by the team to help improve operational efficiencies and effectiveness of the Houston school districts procurement services department.

The Houston Independent School District Procurement Services Department

The Houston Independent School District is the largest public school system in Texas and the seventh-largest in the United States. The school district operates 296 schools with approximately 202,000 students, who are supported by almost 30,000 full- and part-time employees. The General Fund operating budget amounts to approximately $1.6 billion annually. The capital-facilities program of the district--included in the Capital Renovation Fund--amounts to almost $1.1 billion with over $800 million from a 2007 bond issue, about $150 million from pay-as-you-go programs, and about $100 million from other capital sources.

The Councils peer reviews are based on interviews of staff and others, a review of materials provided by the district, observations of operations, and the teams professional judgment. In conducting interviews the teams must rely on the willingness of those interviewed to be factual and forthcoming, but cannot always judge the accuracy of statements made by interviewees.

Council of the Great City Schools

Page 2

Review of the Procurement Services Department of the Houston Independent School District

The district is led by the superintendent of schools who reports to a nine member elected board of education. The superintendent has ten direct line reports as shown in the HISD Organization Chart August 2011 (Exhibit 1 below) and three staff positions (chief of staff, E-rate compliance officer, and general counsel). Exhibit 1. HISD Organization Chart August 2011

Superintendent of Schools

Staff Positions (3)

Chief Major Projects Officer Chief Human Resources Chief Financial Officer Chief Operating Officer Chief Technology Officer

Chief Communications Chief Academic Officer Chief Elementary Schools Chief Middle Schools Chief High Schools

Source: Prepared by CGCS based on information provided by the HISD

The Procurement Services Department is headed by a General Manager who reports directly to the Chief Financial Officer (CFO). As shown in the Procurement Services Department Organization ChartDecember 2011 (Exhibit 2 below), the Procurement Services General Manager has seven direct reports, who are classified as Procurement Managers. In addition, five staff positions including the Web Content Administrator, Web Designer, Customer Service Coordinator, Procurement Coordinator, and Team Leader for Business Operations report to the General Manager.

Council of the Great City Schools

Page 3

Review of the Procurement Services Department of the Houston Independent School District

Exhibit 2. Procurement Services Department Organization Chart December 2011

Chief Financial Officer

Procurement Services General Manager

Staff Positions (5)

Procurement Manager PROCARD Procurement Manager Transportation/Maint

Procurement Manager Office Furniture

Procurement Manager Instructional

Procurement Manager Technology Procurement Manager Construction

Procurement Manager Food Service

Source: Prepared by CGCS based on information provided by the HISD

The Procurement Services Department has an Operating Budget of $1.9 million annually. The departments operating budget and actual expenditures for the current and two prior years are displayed below in Exhibit 3. Exhibit 3. Procurement Services Operating Budget and Actual Expenditures 2010-2012
Object of Expenditure Salaries and Benefits Contracted Services Supplies Equipment Professional Services Other Totals 2010 Budget $1,814,041 124,167 28,000 12,518 5,000 18,850 $2,002,576 2010 Actual $1,738,788 89,049 24,902 11,440 0 19,078 $1,883,257 2011 Budget $1,823,105 109,828 30,650 43,000 3,500 15,952 $2,026,035 2011 Actual $1,750,460 67,449 22,976 32,304 3,000 10,158 $1,886,527 2012 Budget $1,699,502 104,500 42,847 2,772 3,500 16,201 $1,869,322

Source: Prepared by CGCS based on information provided by the HISD

The Procurement Services Department processed about 130,000 purchase-requisitions amounting to more than one-half million line items during the 2010-11 fiscal year. The department also launched 163 Requests for Proposal (RFP) during that fiscal year.

Council of the Great City Schools

Page 4

Review of the Procurement Services Department of the Houston Independent School District

HISD reported that its total non-salary spend amount as $530 million, of which 12 percent, or $65 million, was devoted to businesses identified as minority and women-owned business enterprises (M/WBE). The district identified 30 percent, or $158 million, of its spending to be with vendors within HISDs geographic boundaries. The dollars spent against existing contracts were identified as amounting to 36 percent, or $193 million. In addition, the district has issued almost 950 purchasing cards (Pro-Cards), which accounted for over 100,000 transactions and about $30 million in spending in fiscal year 2011. The department also processed 1,300 travel requisitions amounting to almost $500,000 in that fiscal year.

Findings and Observations

The Councils Strategic Support Teams findings and observations are organized around four general areas or themes: Commendations, Leadership and Management, Organization, and Operations. Commendations The Chief Financial Officer recently appointed an Interim General Manager of Procurement Services who is experienced, competent, and motivated to make positive changes in the organization. In the past two years, the district has made substantial improvements in its application and execution of E-Rate grants. The district appears to have an aggressive program to attract and engage small, minority and women owned business enterprises (M/WBE) as HISD vendors. Staff members of the Procurement Services department appeared to be competent and focused.

Leadership and Management The majority of the districts purchasing, which is based on Requests for Proposals (RFPs), is awarded based on a number of weighted factors that are not always transparent or consistently applied; are often under-value price as a selection criterion; and lead to a perception of manipulation of and distrust in the procurement process. For example o The weighting of various factors for evaluating RFPs is not disclosed in most RFPs (the exception being RFPs for construction contracts). o The weighting of evaluation factors is not done until after the issuance of the RFP and may be done as late as during the vendor-selection phase of the RFP process. o RFP evaluation factors vary between RFPs, and there are instances where the factors change during the RFP process (i.e., a different set of evaluation criteria are published with the solicitation than are actually used in the vendor selection).

Council of the Great City Schools

Page 5

Review of the Procurement Services Department of the Houston Independent School District

o Price as an evaluation factor is generally weighted at about 50 percent in the RFP processes with- Some RFPs weighing price at as little as 12.5 percent. Food Service RFPs valuing price at 25 percent or less.4

While significant purchasing authority has been delegated to schools under the districts decentralization model, there has not been any analyses of the cost-benefits of centralized vs. decentralized procurement processes and there has been limited administrative oversight of school-based procurement processes. The low dollar thresholds that have been established for the districts purchasing methods are not aligned with best practices and restrict efficiency. For example-o The threshold for the formal bidding (or RFP) process has been set at $10,000. (Texas law allows districts to set this threshold at $50,000.) o The district limits Pro-Card transactions to a maximum of $500 for an individual purchase and $5,000 per month on an individual card. The Best Practice Group reported by RPMG Research Corporation-2010 Purchasing Card Benchmark Survey Results-cited an average single transaction spending limit of $3,266 and an average spending limit per month of $11,578. A 2010 Council of the Great City Schools survey indicated that the median purchasing-card single transaction maximum among reporting districts was $1,000.

o The $500 threshold of tagging and tracking of assets, which creates additional administrative work, is not justified based on the cost of the asset. o No dollar-value minimum has been established for purchase requisitions resulting in unnecessary time and effort being expended on low-value transactions. The district requires that the execution of contracts and agreements exceeding $50,000 be vetted by the General Counsel with funding verified by the Finance Department, presented by the Superintendent, and approved by the Board of Education. This ineffective and time-consuming process requires the signatures of the following high-level officials o The President of the Board o The Board Secretary

Construction RFPs value price at the highest levels, ranging between 55 percent and 100 percent in the evaluation process.

Council of the Great City Schools

Page 6

Review of the Procurement Services Department of the Houston Independent School District

o The Superintendent o The General Counsel o The Chief Financial Officer The General Manager of Procurement Services has no delegated authority to execute contracts at any dollar level. The purchasing work of the district is highly transactional and makes minimal use of strategic sourcing, cooperative contracts, master contracts, and blanket purchase orders as cost-effective alternatives to the districts repetitive bidding, RFP, and contracting procurement processes. o As seen in Exhibit 4 below, the Councils team found that- One third of the purchase orders processed were for $500 or less. 86 percent of purchase orders processed were for less than $5,000. Only 1 percent of purchase orders processed were for $50,000 or more Exhibit 4. Purchase Order Processed by Dollar Value, 2010-11
Purchase Order Value Total Dollars Percent of Total Dollars Number of Purchase Orders Percent of Total POs

Up to $500 $500-$2,500 $2,500-$5,000 $5,000-$10,000 $10,000-$25,000 $25,000-$ 50,000 $50,000 or More Totals

$3,317,164 21,761,004 16,630,029 18,823,870 30,656,515 24,562,811 79,157,857 $194,909,252

2% 11% 9% 10% 16% 13% 41% 100%

14,077 17,639 4,738 2,692 1,940 687 485 42,258

33% 42% 11% 6% 5% 2% 1% 100%

Prepared by CGCS based on data provided by HISD

Senior financial management of the district is individually reviewing thousands of contracts each year, many of which are for low dollar amounts. The team was told that the General Counsels office reviews all consultant contracts, regardless of value, a process that can take 60 to 90 days to complete.

Council of the Great City Schools

Page 7

Review of the Procurement Services Department of the Houston Independent School District

Approximately $10 million of expenditures are never processed through an adopted procurement method. For example o About $5 million is expended on direct payments to vendors (payments for transactions without purchase orders or contracts) outside of the normal procurement processes. o $4.3 million of expenditures for school-based consultants and after-school programs are routed through the General Counsels office without going through the procurement office.

There appears to be an overall lack of planning within the procurement department. For example o The Procurement Services department has no strategic or business plan outlining its future direction, and process improvements appear to take place on an ad hoc basis. o While an annual procurement calendar exists, it is incomplete and apparently not utilized. o Buyers appear to use an excessive number of temporary-contract extensions because bids and RFPs are not completed on a timely basis.

The team encountered a number of situations that suggested poor communications, inadequate coordination, or outright conflicts between Procurement Services personnel and administrators in other functional units. For example o End users of Procurement Services indicated that often they are not involved in selecting the procurement methodology that will be used for a particular contract, e.g., selecting a large number of awardees for a small volume contract. o End users complained that they are not frequently involved in the review of final terms and conditions of the contracts and only learn of them after the contracts are finalized. o The team was told that some buyers project an adversarial attitude and do not view themselves as part of a total team effort by the district. o Some customers indicated that poor communications between buyers in the Information Technology (IT) and Procurement Services units creates obstacles to efficiency.

The team requested, but did not receive, copies of internal audits of Procurement Services operations from the Office of the Inspector General. There is no formalized professional-development program for Procurement Services employees. In addition Page 8

Council of the Great City Schools

Review of the Procurement Services Department of the Houston Independent School District

o While the district acknowledges the importance of certification, it has not been aggressive in requiring staff certification and/or underwriting some portion of the costs to encourage professional development for procurement services employees. o Some long-time buyers and senior buyers do not have public sector professional certification. o Some procurement managers have not obtained public sector managerial professional certification. The training of school-based and central-office staff in procurement processes and automated procurement systems is inadequate. For example o The team was advised that training is conducted primarily by IT personnel with little participation by Purchasing Services staff.
o

SAP training conferences are not attended by functional power users.

o Principals indicated that webinar training is insufficient and that purchasing issues and methodologies are not adequately covered. Organization The organizational placement of Procurement Services (reporting to the Chief Financial Officer) does not maximize potential efficiencies or contribute to the internal control principle of separation of responsibilities. For example o The financial part of an organization is frequently focused on controls, whereas the operations portion is more often focused on customer service and productivity. o Principles of internal controls would suggest separating budget authorization and vendor payments from vendor soliciting and contracting. Operations The districts investment in its Enterprise Resource Planning (ERP) system has not been optimized to enhance procurement processes. For example o The functionality allowing supporting documents to be attached to requisitions is not being utilized. o The automated purchase-order faxing functionality has not been acquired, configured, and operationalized by the district thereby causing staff to manually fax purchase orders to vendors. o The ability to make payments to multiple-street addresses for the same vendor name has not been operationalized.

Council of the Great City Schools

Page 9

Review of the Procurement Services Department of the Houston Independent School District

o It was unclear to the team whether the tracking function in SAP is being used effectively to ensure purchase orders do not exceed the school board approved contract limits. The team was advised that procurement policies and procedures had not been updated in over two years, leading to confusion and miscommunications. For example o It was reported that different buyers provide conflicting information and use different procedures. o Some communications from buyers appear to be based on past practice rather than adopted procedures. Roles, responsibilities, and processes have not been clearly defined between procurement and end users as it relates to negotiations with vendors and with contract administration. The team noted these additional concerns related to the districts contracting processes o There does not seem to be clearly defined criteria regarding when to renew or rebid an existing contract. o Research of product markets is not consistently conducted by staff members prior to renewal or awarding of a contract.
o

The RFP process, rather than a straight bid (Invitation to Bid), is used for routine purchasing of standard, off-the-shelf commodities.

o The district submits annual contract renewals to the school board for approval, even though they have board-approved multi-year agreements. o The total-cost-ofownership is not always built into the RFP evaluation and selection processes. o Standardized form contracts are reviewed by the General Counsels office. o Many vendors reportedly find it difficult to do business with the district due to the size of the solicitations (up to 150 pages). Vendor protest policies are not incorporated in solicitation documents nor are they posted on the procurement web site, and procedures to be followed are not well understood. The rotation of contract work among multi-award vendors is reportedly not being done on a consistent basis. The process for emergency orders is reported to take up to five days, making it ineffective in meeting district needs. Page 10

Council of the Great City Schools

Review of the Procurement Services Department of the Houston Independent School District

Although federal certification documents are included in RFPs and bid solicitations, staff is not checking for excluded parties listed in the federal Excluded Parties List System (EPLS) web site, as required by law for certain contracts and purchases over $25,000. The Procurement Services department has not monitored, measured, or documented vendor performance. The team noted that several links on the Procurement Services website are not active and some information is not current. Procurement Services does not rotate the commodity assignments of buyers on a regular basis. The district has held only one vendor fair in the past two and one-half years. There are deficiencies in the operation of the travel desk, including the following o The district does not collect credits, points, or miles for air or hotel expenses. o The district writes checks for hotel expenses, rather than using Pro-Card or electronic payments. o Air fare and hotel expenses are often paid in advance, rather than encouraging employees to apply for reimbursement. o The timing of travel-desk processing results in the loss of early-bird discounts.

Recommendations
1. Change the reporting relationship of the Procurement Services Department to the Chief Operating Officer. 2. Initiate a nationwide search for a Procurement Services General Manager, preferably having a Certified Public Purchasing Officer (CPPO), Certified Purchasing Manager (C.P.M.), or equivalent designation. 3. Restructure the districts procurement contracting processes to a. Increase the use of strategic sourcing, cooperative contracts, master contracts, and blanket purchase orders. b. Increase the use of straight bidding with detailed specifications. c. When using weighted RFPs i. Provide full disclosure in solicitation documents of the evaluation criteria and the weights given to each factor in advance Council of the Great City Schools Page 11

Review of the Procurement Services Department of the Houston Independent School District

ii. Use the same weighting factors in the evaluation process as disclosed in the solicitation documents iii. Provide substantially higher value to price as a weighted factor. d. Establish standard consultant and professional services contracts to provide for an expedited contract-review process within the Procurement Services Department. e. Eliminate the use of temporary contract extensions by conducting bids and RFPs on a timely basis f. Publicize and communicate the vendor-appeal process. g. Provide a monthly report to the Board of Education detailing the districts non-salary spend amounts by category. 4. Conduct a cost/benefit analysis of centralized vs. decentralized procurement processes. 5. Establish appropriate standards and oversight for school-site based procurement processes. 6. Increase dollar-value thresholds for purchasing processes as follows a. Increase the formal bidding (or RFP) threshold to the state-allowed limit of $50,000. b. Increase the single transaction limit on the district Pro-Card from the current level of $500 to an amount more reflective of industry best practices. c. Increase the threshold for the tagging and tracking of assets from the current level of $500. d. Establish a minimum dollar amount for purchase requisitions. 7. Eliminate inefficient and cumbersome contract signature processes and delegate signature authority for board approved contracts, as well as contracts below the board approval threshold, to the General Manager of Procurement Services. 8. Significantly reduce the number of direct-payment transactions constituting purchases that are not processed through the Procurement Services Department. 9. Establish a strategic-business plan for the Procurement Services Department that is linked to the districts strategic plan and contains goals, objectives, timelines, performance measures, and accountabilities. 10. Review and update procurement master calendars for each unit within the department and establish a monitoring and reporting component. 11. Improve communications and coordination with end users through their timely involvement in the contracting process. Council of the Great City Schools Page 12

Review of the Procurement Services Department of the Houston Independent School District

12. Ensure that internal audits are conducted of Procurement Services operations on a regular basis and make the resulting reports available to the School Board, administration, and the public. 13. Establish a formalized professional development program5 for staff members of the department and encourage buyers and managers to become certified by the Texas Association of School Business Officials, the Universal Public Purchasing Certification Council, or The Institute of Supply Management. 14. Enhance the SAP Supplier Relationship Management (SRM) system training. 15. Enhance the functionality of the SAP SRM system by incorporating a. Comprehensive budget checking and expenditure control capabilities. b. The attachment of documents to requisitions by requesters c. Automated faxing capability. 16. Update and post on the departments web site all procurement policies and procedures, including-a. The roles and responsibilities of both Procurement Services and end users in the solicitation, negotiation, creation, and administration of contracts b. Clearly defined criteria on when to renew and rebid existing contracts c. Requirements for researching product markets prior to major solicitations d. Total-cost-ofownership in evaluations and selection processes. e. How work on multi-vendor contracts will be distributed. f. A revised emergency procurement procedure that can address urgent situations. g. Processes that monitor, measure, and document vendor performance. 17. Establish procedures to ensure compliance with federal requirements on the Excluded Parties List System (EPLS). 18. Periodically rotate the commodity assignments of buyers in the Procurement Services department. 19. Establish a regular schedule of vendor fairs. 20. Improve the operational efficiency of the travel desk by

Two and three day professional development courses are available from the National Association of Governmental Purchasing (NAGP), including Introduction to Public Purchasing, Sourcing in the Public Sector, Developing and Managing RFPs, Contract Administration, and Legal Aspect of Purchasing.

Council of the Great City Schools

Page 13

Review of the Procurement Services Department of the Houston Independent School District

a. Performing a cost-benefit analysis to determine the financial and operational effectiveness of staffing this function vs. self-purchasing of travel tickets by staff upon approval of a travel request b. Encouraging employees to request travel reimbursement (rather than advance payment) by expediting reimbursements c. Paying hotel bills by Pro-Card or other electronic means rather than checks d. Considering the use of declining balance debit cards for travel expenses e. Developing a process to capture credits, points, and miles available for air and hotel expenditures.

Council of the Great City Schools

Page 14

Review of the Procurement Services Department of the Houston Independent School District

Appendix A. STRATEGIC SUPPORT TEAM

Robert Carlson Robert Carlson is Director of Management Services for the Council of the Great City Schools. In that capacity, he provides Strategic Support Teams and manages operational reviews for superintendents and senior managers; convenes annual meetings of Chief Financial Officers, Chief Operating Officers, Transportation Directors, and Chief Information Officers and Technology Directors; fields hundreds of requests for management information; and has developed and maintains a Web-based management library. Prior to joining the Council, Dr. Carlson was an executive assistant in the Office of the Superintendent of the District of Columbia Public Schools. He holds master and doctorate degrees in administration from The Catholic University of America; a B.A. degree in political science from Ohio Wesleyan University; and has done advanced graduate work in political science at Syracuse University and the State Universities of New York. David W. Koch David Koch is the former Chief Administrative Officer for the Los Angeles Unified School District (LAUSD). The LAUSD is the nations second largest public school system, with more than 700,000 students in grades K-12, an annual budget of more than $9 billion, and more than 80,000 full- and part-time employees. Mr. Kochs responsibilities encompassed virtually all non-instructional operations of the district, including finance, facilities, information technology, and all of the business functions. Mr. Koch also served the LAUSD as business manager, executive director of information services, and deputy controller. Mr. Koch was also business manager for the Kansas City, Missouri Public School District and was with Arthur Young and Company prior to entering public service. He is a graduate of the University of Missouri and a Certified Public Accountant in the states of California, Missouri, and Kansas. Currently a resident of Long Beach, California, Mr. Koch provides consulting services to public sector clients and companies doing business with public sector agencies. Joseph A. Gomez Joseph A. Gomez is the former Assistant Superintendent of Procurement Management Services of the Miami-Dade County School Board, Florida. The Miami-Dade County school district is the 4th largest in the nation, with over 345,000 students, and over 45,000 full-time and part-time employees. The annual budget is over $5 billion. His responsibilities included the supervision of Procurement Management, Stores and Mail Distribution, Surplus Property, Maintenance Materials Management, Materials Testing department, Furniture Fixtures and Equipment and Textbook Services. Mr. Gomez is a certified CPM, APP, CPPO, CPPB, and has 35 years of experience in procurement and materials management. He has a B.A. in Business Administration, and completed the Executive Development Program at Florida International University

Council of the Great City Schools

Page 15

Review of the Procurement Services Department of the Houston Independent School District

Arthur S. Hanby, Jr. Arthur Hanby is the Strategic Sourcing and Contracts Officer for the San Diego Unified School District (SDUSD). SDUSD is the second largest district in California and serves over 130,000 students with over 250 educational facilities. He is responsible for the districts entire procurement and contracting functions, including contracting for commodities, equipment, professional, construction and non-construction services; and for the operations of the districts PeopleSoft ERP Financial System eProcurement, Purchasing, eSupplier Connection, Supplier Contracts Management and ancillary modules. Prior to working at SDUSD, Mr. Hanby was the Deputy Chief Contracting Officer and Executive Director for the Detroit Public Schools and the Director of Purchasing and Warehousing for The School Board of Broward County in Fort Lauderdale, Florida. Mr. Hanby has a Bachelors Degree from the University of Delaware and a Masters Degree in Business Management from Central Michigan University. He is both a Certified Public Purchasing Officer (CPPO) and Certified Professional Public Buyer (CPPB), and holds Lifetime certification as both a Certified Purchasing Manager (C.P.M.) and Accredited Purchasing Practitioner (A.P.P.). Mr. Hanby is a member of the National Institute of Governmental Purchasing, and also a member of the U.S. Communities Government Purchasing Alliance Advisory Board, appointed jointly by the California Association of School Business Officials (CASBO) and the California School Boards Association (CSBA), and previously by the National Institute of Governmental Purchasing (NIGP). He has served as a member of the NIGP Research Committee and the Purchasing and Supply Management Committee of ASBO International. Mr. Hanby was a Qualified Examiner for the Universal Public Purchasing Certification Council, which certifies public purchasing professionals. In 2009, he was elected to the Board of Directors of the Public Sector User Group (PSUG), an organization of public sector entities, including K-12 school districts, which use Oracle Corporations ERP applications software. He has been a frequent public speaker at PeopleSoft/Oracle conferences about its eProcurement systems and is often sought for his forward-thinking in eprocurement technology. He is a recipient of the U.S. Department of Commerce Public Service Award. Duane Johnson Duane Johnson is the Chief Procurement Officer (CPO) for the Los Angeles Unified School District (LAUSD). Johnson was named the CPO of LAUSD on May 16, 2005, and assumed responsibility for Purchasing, Contract Administration, Strategic Sourcing, Materiel Management, Policy Procedure & Compliance, Vendor Management, Truck Operations, Document Reproduction, and Mail Unit. He began his career with LAUSD as the Director of Contract Administration in July, 2001. His previous experience consists of over twenty years in public sector socio-economic programs and government contracting specifically in Public Transportation. He began his career as an Equal Opportunity Analyst for minority business wherein he developed strategies to promote utilization of minority contractors increasing minority business participation in transportation projects to unprecedented percentages. In 1983, he was promoted to the position of Contract Administrator and began to assume increasing responsibility in contracting activity. This included substantial involvement in the design and construction of the Los Angeles underground subway system leading to his subsequent appointment to Director of Contracts. He joined public education in 2001 and transformed the procurement practices of the second largest school district in the nation. Johnson earned a masters degree in public education from California State University Council of the Great City Schools Page 16

Review of the Procurement Services Department of the Houston Independent School District

Dominguez Hills, Carson, CA. and a bachelors of arts degree from Dominican College, Racine, WI. He also attended Northrop University School of Law. Christopher P. Steele Christopher Steele is the Senior Director, Purchases & Supply for Norfolk Public Schools, Virginia. Mr. Steele has over 30 years experience in operational supply chain logistics, financial management, facility management and acquisition contracting with both the public (federal, state, and K-12) and private sector. Mr. Steele holds a masters degree in engineering and business from the University of Kansas, a masters degree in human resource management from Pepperdine University, and a B.S. degree in chemistry from Pennsylvania State University. Mr. Steele is a Certified Purchasing Manager (C.P.M.), Certified Purchasing Card Professional (CPCP), Certified Management Accountant (CMA), Certified Professional Public Buyer (CPPB) and he attained the highest certification level in the federal Acquisition Professional Corps. Mr. Steele is a member of the National Institute of Governmental Purchasing K12 Leadership Team and the Council of Great City Schools KPI Procurement Team,

Council of the Great City Schools

Page 17

Review of the Procurement Services Department of the Houston Independent School District

Appendix B. WORKING AGENDA Strategic Support/Peer Review Team

Procurement Operations
Houston Independent School District
October 9-12, 2011 Contacts: Melinda Garrett Chief Financial Officer Email: mgarrett@houstonisd.org
Sunday, October 9 6:30 p.m. Team Arrival Dinner Meeting Melinda Garrett Chief Financial Officer Leo Bobadilla Chief Operating Officer Michele Pola Chief of Staff

Others Ken Huewitt Rick Coulter

Monday, October 10 7:00 8:00 a.m. Continental Breakfast Rick Coulter Interim General Manager of Procurement Enriqueta Berruete

8:15 -

9:15 a.m.

Team Interviews

Team Leader, Business Operations Antoinette Lewis

Procurement Coordinator

Jarry Wilson
Customer Service Coordinator Adam Arbour Web Content Administrator Jason Washington Website Designer 9:30 - 10:30 a.m. Team Interviews Guy Mazzola Procurement Manager Ethel Kujimiyo Document Control Administrator Amiri Scott Vendor Master Specialist Elvis Eaglin Procurement Manager, Construction

10:45 - 12:00 p.m.

Team Interviews

12:00 -

1:00 p.m.

Working Luncheon Team Interviews Chalita Cyprian Procurement Systems Manager Donna Aron PROCARD Administrator Patricia Griggs PROCARD Administrator

1:00 - 2:00 p.m.

Council of the Great City Schools

Page 18

Review of the Procurement Services Department of the Houston Independent School District
Tara Haire Travel Specialist 2:15 3:15 p.m. Team Interviews Cesar Rodriguez Procurement Manager, Office Furniture Bill Garner Karen Allen Senior Buyers Demetria Murray Buyer Everlynn Goff Procurement Manager, Instructional Supplies Carri Wallis Danyelle Osborne Buyers Ad Hoc Principals Committee Superintendents Conference Room

3:15 -

4:15 p.m.

Team Interviews

4:15 -

5:15 p.m.

Team Interviews

Team Discussion of Work Plan for Balance of Site Visit Tuesday, October 11 7:00 8:00 a.m. Continental Breakfast Ken Huewitt Controller Robert Fazakerly Procurement Manager, Technology/Office Ken Phillips Senior Buyer Ryan Titzman Maria Goldman Buyers 9:15 - 10:15 a.m. Team Interviews Andre Morrow Procurement Manager, Transportation/Maintenance Gary Hogg Kimberly Burnaman Janice James Senior Buyers Earl Finley Procurement Manager, Food Services Mark Martinez Senior Buyer Beth Rutherford Jessie Ray Buyer

8:00 -

9:00 a.m.

Team Interviews

Equipment

10:30 11:30 a.m.

Team Interviews

11:45 - 12:45 p.m. 1:00 2:00 p.m.

Working Luncheon Team Interviews Nicole Ware-Smith Senior Manager, Warehouse Operations Oscar Montemayor Manager, Warehouse Support Timothy Brown Manager, Warehouse Operations Veronica Ruiz Manager, Furniture Services Harvey Schulze Manager, Vehicle Services

Council of the Great City Schools

Page 19

Review of the Procurement Services Department of the Houston Independent School District
2:15 3:15 a.m. Team Interviews Focus Group wth Non-School Users Instructional and Operational Divisions Focus Group wth Non-School Users Instructional and Operational Divisions

3:15 -

4:30 p.m.

Team Interviews

5:30 p.m. Wednesday, October 12 7:00 - 12:00 Noon

Team Discussion of Work Plan for Balance of Site Visit

Team Meeting

Discussion of Findings & Recommendations Dr. Terry Grier Superintendent Michele Pola Chief of Staff Melinda Garrett Chief Financial Officer Leo Bobadilla Chief Operating Officer Ken Huewitt Controller Rick Coulter Procurement

12:00 - 1:00 p.m.

Working Luncheon & Debriefing

1:00 p.m.

Adjourn & Departures

Council of the Great City Schools

Page 20

Review of the Procurement Services Department of the Houston Independent School District

Appendix C. DISTRICT PERSONNEL INTERVIEWED

Dr. Terry Grier, Superintendent of Schools Michele Pola, Chief of Staff Melinda Garrett, Chief Financial Officer Ken Huewitt, Controller Arnold Viramontes, Chief Information Technology Officer Rick Coulter, Interim General Manager of Procurement Enriqueta Berruete, Team Leader, Business Operations Antoinette Lewis, Procurement Coordinator Adam Arbour, Web Content Administrator Jason Washington, Website Designer Guy Mazzola, Procurement Manager Ethel Kujimiyo, Document Control Administrator Amiri Scott, Vendor Master Specialist Elvis Eaglin, Procurement Manager, Construction Chalita Cyprian, Procurement Systems Manager Donna Aron, PROCARD Administrator Patricia Griggs, PROCARD Administrator Stuart Stratford, Travel Specialist Cesar Rodriguez, Procurement Manager, Office Furniture Bill Garner, Senior Buyer Demetria Murray, Buyer Everlynn Goff, Procurement Manager, Instructional Supplies Carri Wallis, Buyer Danyelle Osborne, Buyer Noemi Vaglienty, Buyer Robert Fazakerly, Procurement Manager, Technology/Office Equipment Ken Phillips, Senior Buyer Ryan Titzman, Buyer Maria Goldman, Buyer Andre Morrow, Procurement Manager, Transportation/Maintenance Gary Hogg, Buyer Kimberly Burnaman, Senior Buyer Janice James, Buyer Ursula Shelton, Buyer Karen Allen, Senior Buyer Earl Finley, Procurement Manager, Food Services Mark Martinez, Senior Buyer Beth Rutherford, Buyer Jessie Ray, Buyer Nicole Ware-Smith, Senior Manager, Warehouse Operations Oscar Montemayor, Manager, Warehouse Support Veronica Ruiz, Manager, Furniture Services Page 21

Council of the Great City Schools

Review of the Procurement Services Department of the Houston Independent School District

Harvey Schulze, Manager, Vehicle Services Charotte Holden, Administrative Services Aaron Spence, Chief School Officer, High Schools Kevin Hobbs, Leadership Development Dallas Dance, Chief School Officer, Middle Schools Mark Smith, Academic Services Bill Horwath, Performance Management Sara Sagarnaga, Human Recourses Sharon Eaves, Budgeting Don Boehm, Finance Attorney Richard Patton, E-Rate Compliance Melanie Evans-Smith, Professional Support and Development Victor Mitchell, School Police Department Robert Mock, School Police Department Terry Daniels, Police Department Kermit Falgout, Risk Management Dan Bankhead, Construction Services Willie Burroughs, Facility Services Brain Busby, Facility Services Gavin Dillingham, Energy Service Scott Lazar, Facility Services Eugene Salazar, Facility Services Mark Swackhamer, Transportation Nathan Graf, Transportation Issa Dadoush, Facilities Services Alexis Licata, Business Assistance Christian Masick, Policy Administration Melanie Farmer, Transportation Jimmy Dotson, School Police Department Brian Giles, Food Service Clifford W. Buck, Principal Beverly J. Cage, Principal Norma L. Perez-Gwynn, Principal Armando Lujan, Principal David E. Terrell, Principal Kregg A. Cuellar, Principal Michael D. Harrison, Principal Hafedh Azaiez, Principal Bertie A. Simmons, Principal Takisha M. Bolden, Principal Sonja Williams, Principal Jaime Castaneda, Principal Noelia G. Longoria, Principal

Council of the Great City Schools

Page 22

Review of the Procurement Services Department of the Houston Independent School District

Appendix D. DOCUMENTS REVIEWED

HISD Organization Chart, August 2011 Procurement Services Organization Chart, September 2011 HISD Board Policies o Ethics Prohibited Practices, Issued 2/1/2010 o Fiscal Management Goals and Objectives , CCA1 (Regulation), Financial Ethics, Issued 4/15/2010 o Fiscal Management Goals and Objectives , CCA2 (Regulation), Financial Ethics, Issued 9/2/2010 o Fiscal Management Goals and Objectives , CCA(Local), Financial Ethics, Issued 11/30/2010 o Accounting Audits, CFC (Legal), Issued 2/1/2010 o Accounting Audits, CFC (Legal), Issued 6/14/2010 o Purchasing and Acquisition, CH (Legal), Issued 11/3/2009 o Purchasing and Acquisition, CH (Local), Issued 1/15/2010 Finance Manual, Procurement Section (1300) Section 1303, Purchasing Guidelines Section 1317, Supplier Performance Flow Charts o Business Process of Acquiring a Signed Contract o Cross-Functional Team Process o Instructional Products and Services, Evaluation Business Process o Requisition Business Process o Shopping Cart Business Process o Complete RFP Flow Chart Process o Waiver of Competitive Bidding Business Process o SRM RFX Request for X Business Process o Supplier Registration Business Process o Assurance of Vendor Payment of Ad Valorem Taxes o Supplier Score Card Business Process Average Lead-time to Process Requisitions, August 2011 Amount Spent with M/WBE Suppliers, August 2011 PO Lines Processed Against Annual Contracts, August 2011 Dollar Amount and Number of New and Renewed Proposal Projects Completed per Month Procurement Services Total Requisition Line Items Processed, August 2011 Supplier Registration, August 2011 Procurement Services Total Dollars Spent on P.O.s, August 2011 Procurement Services Total Number of P.O. Transactions, August 2011 Evaluation of Competitive Sealed Proposals for Alcott ES, Garden Villas ES, Woodson MS Renovation, September 13, 2011 CSP Proposal Tabulation, Alcott ES, Garden Villas ES and Woodson PK - 8 Renovation Project, July 14 2011 CPS Matrix, Alcott ES, Garden Villas ES and Woodson, August 29, 2011 Page 23

Council of the Great City Schools

Review of the Procurement Services Department of the Houston Independent School District

Compliance Of Specific Conditions For Minority And Women Business Enterprise Participation Documentation For Alcott ES, Garden Villas ES, And Woodson MS, Renovations,8/29/2011 Approval Of Primary Construction Methods For District Construction Contracts, Criteria for Selection of Contractors, and Delegation of Evaluation Authority, Board of Education Meeting of February 10, 2011 Request for Proposal (Pro-forma), Part I, II, III, & IV, Version 6.2 Suppliers Score Card, HISD Materials Management, (Internet Screen Shots) Procurement Services, Employee Portal, (Internet Screen Shots) Proposal Solicitations Download Homepage, September 14, 2011 (Internet Screen Shots) Active Product Categories (54 Spend Categories and 457 Product Categories) Annual Proposal Calendar, September 14, 2011 Procurement Services BUYLINES, 9/20/2011 (Texas) Education Code, Chapter 44. Fiscal Management Authority to Negotiate and Execute Interlocal Agreements with Various Purchasing Cooperatives, Board of Education Meeting of January 15, 2009 (Texas) H.B. No. 628, May 2011 House Research Organization Bill Analysis, 5/6/2011, HB628 HISP Procurement Services Manual, Last Updated May28, 2010 How to do Business with HISD Supplier Agreement Between Houston Independent School District and Name Of Supplier, (Pro-forma) HISD Procurement Services, Major Accomplishments Report, July1, 2010-June 30, 2011 Vision Statement, Mission Statement, Guiding Principles, Core Values, and Motto HISD Sample Purchase Order HISD ProCard, User Manual, Revised: August 2011 HISD Request For Quote (AED Maintenance) SAP BI Reports (Screen Shots) SAP Enterprise Portal, Training Manual Service Contract between HISD and Provider, ( Pro-Forma), Revised May 2011 Request to Waive Competitive Bidding, (Form) SRM Shopping Cart, (Screen shots) Texas Education Agency, Financial Accountability System, Resource Guidelines, January 2010 Procurement Services, Technology Plan Request for Qualifications, Performance Audit of Contract Recommendation Awards Processes, Project Number -11-09-04 Certifications of Procurement Managers/buyers NIGP Webinars for 2008, 2009, ooler2010, and 2011 Over $10,000 Spend, by Contract, 2010-11 Sec. 271.903. COMMITMENT OF CURRENT REVENUE 2010-2011 Vendor Report, Description/Amount Vendor Payments, 7-01-11 to 10-10-2011 Purchasing Order line Details, 10/10/2011

Council of the Great City Schools

Page 24

Review of the Procurement Services Department of the Houston Independent School District

2010-2011 Expenditures For Professional, Consulting & Miscellaneous Contracted Services Project listing, Fazakerly Group, October 6, 2011 Request for Proposal, Project 10-06-06, Project Name: End User Devices District wide RFP Results, End User Devices: Computers; printers; & Servers (#10-06-06), October/ 2010 Contracts by product Category Approval of Primary Construction Methods for District Construction Contracts, Criteria of Selection of Contractors, and delegation of evaluation authority. Summary of Direct Payments, FY 2011 2010- 2011 Summary of Consultants, Miscellaneous Contracts, and Professional Services Payments Rodriguez Team Projects Summary Goff Team Projects Summary Food Service RFP Summary Eaglin Team Projects Summary Morrow Team Projects Summary

Council of the Great City Schools

Page 25

Review of the Procurement Services Department of the Houston Independent School District

APPENDIX E. ABOUT THE COUNCIL

Council of the Great City Schools The Council of the Great City Schools is a coalition of 65 of the nations largest urban public school systems. The organizations Board of Directors is composed of the Superintendent, CEO or Chancellor of Schools, and one School Board member from each member city. An Executive Committee of 24 individuals, equally divided in number between Superintendents and School Board members, provides regular oversight of the 501(c)(3) organization. The composition of the organization makes it the only independent national group representing both governing and administrative arms of urban education and the only education association whose sole purpose is urban. The mission of the Council is to advocate for urban public education and assist its members in their improvement and reform. The Council provides services to its members in the areas of legislation, research, communications, curriculum and instruction, and management. The group convenes two major conferences each year; conducts studies of urban school conditions and trends; and operates ongoing networks of senior school district managers with responsibilities for such areas as federal programs, operations, finance, personnel, communications, research, and technology. Finally, the organization informs the nations policymakers, the media, and the public about the successes and challenges of schools in the nations Great Cities. Urban school leaders from across the country use the organization as a source of information and an umbrella for their joint activities and concerns. The Council was founded in 1956 and incorporated in 1961, and has its headquarters in Washington, D.C.

Council of the Great City Schools

Page 26

Review of the Procurement Services Department of the Houston Independent School District

History of Strategic Support Teams Conducted by the Council of the Great City Schools
City Albuquerque Area Facilities and Roofing Human Resources Information Technology Special Education Legal Services Safety and Security Anchorage Finance Communications Math Instruction Atlanta Facilities Transportation Austin Special Education Baltimore Information Technology Birmingham Organizational Structure Operations Facilities Boston Special Education Broward County (FL) Information Technology Food Services Transportation Buffalo Superintendent Support Organizational Structure Curriculum and Instruction Personnel Facilities and Operations Communications Finance Finance II Bilingual Education Caddo Parish (LA) Facilities Charleston Special Education Charlotte-Mecklenburg Human Resources Cincinnati 2007 2005 2004 2000 2000 2000 2000 2000 2000 2000 2003 2009 2000 2009 2009 2009 2007 2008 2010 2011 2010 2009 2010 2004 2008 2010 Year 2003 2003 2003 2005 2005 2007

Council of the Great City Schools

Page 27

Review of the Procurement Services Department of the Houston Independent School District Curriculum and Instruction Curriculum and Instruction Chicago Warehouse Operations Special Education Christina (DE) Curriculum and Instruction Cleveland Student Assignments Transportation Safety and Security Facilities Financing Facilities Operations Transportation Curriculum and Instruction Safety and Security Safety and Security Theme Schools Columbus Superintendent Support Human Resources Facilities Financing Finance and Treasury Budget Curriculum and Instruction Information Technology Food Services Transportation Dallas Procurement Staffing Levels Dayton Superintendent Support Curriculum and Instruction Finance Communications Curriculum and Instruction Budget Curriculum and Instruction Denver Superintendent Support Personnel Curriculum and Instruction Bilingual Education Curriculum and Instruction Des Moines Budget and Finance Detroit Curriculum and Instruction 2002 2003 2001 2001 2005 2006 2008 2001 2001 2001 2002 2005 2005 2008 2007 2009 2001 2001 2002 2003 2003 2005 2007 2007 2009 1999, 2000 2000 2000 2000 2000 2004 2005 2007 2008 2009 2007 2010 2011 2004 2009

Council of the Great City Schools

Page 28

Review of the Procurement Services Department of the Houston Independent School District Assessment Communications Curriculum and Assessment Communications Textbook Procurement Food Services Curriculum and Instruction Facilities Finance and Budget Information Technology Stimulus planning Greensboro Bilingual Education Information Technology Special Education Facilities Human Resources Hillsborough County (FLA) Transportation Procurement Houston Facilities Operations Capitol Program Information Technology Procurement Indianapolis Transportation Information Technology Jackson (MS) Bond Referendum Communications Jacksonville Organization and Management Operations Human Resources Finance Information Technology Finance Kansas City Human Resources Information Technology Finance Operations Purchasing Curriculum and Instruction Program Implementation Stimulus Planning Little Rock Curriculum and Instruction 2010 2005 2005 2005 2005 2006 2006 2007 2009 2002 2002 2002 2002 2002 2006 2006 2009 2007 2010 2010 2010 2011 2011 2005 2005 2002 2003 2003 2004 2007 2002 2002 2003 2003 2004 2007 2008 2008 2008 2008 2009

Council of the Great City Schools

Page 29

Review of the Procurement Services Department of the Houston Independent School District Los Angeles Budget and Finance Organizational Structure Finance Information Technology Human Resources Business Services Louisville Management Information Staffing study Memphis Information Technology Miami-Dade County Construction Management Food Services Transportation Maintenance & Operations Capital Projects Milwaukee Research and Testing Safety and Security School Board Support Curriculum and Instruction Alternative Education Human Resources Minneapolis Curriculum and Instruction Finance Federal Programs Newark Curriculum and Instruction Food Service New Orleans Personnel Transportation Information Technology Hurricane Damage Assessment Curriculum and Instruction New York City Special Education Norfolk Testing and Assessment Orange County Information Technology Philadelphia Curriculum and Instruction Federal Programs Food Service Facilities 2003 2003 2003 2003 2010 2003 2008 2001 2002 2003 2005 2006 2007 2008 2004 2004 2004 1999 2000 1999 2006 2007 2009 2003 2009 2009 2009 2009 2007 2005 2009 2002 2005 2005 2005 2005 2005

Council of the Great City Schools

Page 30

Review of the Procurement Services Department of the Houston Independent School District Transportation Human Resources Budget Human Resource Special Education Pittsburgh Curriculum and Instruction Technology Finance Special Education Portland Finance and Budget Procurement Operations Providence Business Operations MIS and Technology Personnel Human Resources Special Education Bilingual Education Richmond Transportation Curriculum and Instruction Federal Programs Special Education Rochester Finance and Technology Transportation Food Services Special Education San Diego Finance Food Service Transportation Procurement San Francisco Technology St. Louis Special Education Curriculum and Instruction Federal Programs Textbook Procurement Human Resources St. Paul Special Education Seattle Human Resources Budget and Finance 2008 2008 2011 2003 2004 2004 2004 2005 2001 2006 2006 2007 2007 2003 2004 2004 2008 2003 2003 2003 2003 2001 2001 2001 2007 2011 2011 2010 2010 2010 2005 2006 2006 2009 2003 2004 2008 2009 2009

Council of the Great City Schools

Page 31

Review of the Procurement Services Department of the Houston Independent School District Information Technology Bilingual Education Transportation Capital Projects Maintenance and Operations Procurement Food Services Toledo Curriculum and Instruction Washington, D.C. Finance and Procurement Personnel Communications Transportation Facilities Management Special Education Legal and General Counsel MIS and Technology Curriculum and Instruction Budget and Finance Transportation Curriculum and Instruction Common Core Standards Wichita Transportation 2009 1998 1998 1998 1998 1998 1998 1998 1998 2003 2005 2005 2007 2011 2005 2008 2008 2008 2008 2008 2008 2008

Council of the Great City Schools

Page 32