Governor’s Executive Order Directs Agencies to Implement Cost Saving Measures

Executive Order 2008-011 signed by Governor Steve Beshear on Jan. 4, 2008 provides directives to immediately reduce administrative costs in state government.  It includes provisions for equipment and furniture purchases, printing, personal services contracts, travel, energy efficiency, and the sale of surplus property.

Finance and Administration Cabinet Secretary Jonathan Miller sent memos to Cabinet Secretaries, Agency Heads, and Constitutional Officers on Jan. 10, with follow-up on Jan. 25, establishing the procedures to implement each of these directives. 

Please note that any requests for exceptions to these cost saving provisions will require the signature of Cabinet Secretaries or Agency Heads before the Finance and Administration Cabinet would consider that request.

The Executive Order mandates the following cost-saving measures:

1. All new contracts, including personal service contracts and leases, must be justified as essential to the delivery of services and must demonstrate that the service cannot be provided with existing personnel.  All existing contracts shall be reviewed for cost savings and potential elimination.  The Finance Secretary must approve all new and amended contracts;
2. A moratorium has been placed on all purchases of furniture and equipment by state agencies.  Agencies with critical needs must justify those needs to the Finance Secretary, who may approve exceptions if conditions warrant;
3. State agencies are directed to review their inventories of state owned assets such as real property, equipment, furniture, and vehicles, and to work with the Finance Cabinet’s Division of Surplus Property as to disposal of surplus property.  This will require involvement from agency management to force a comprehensive analysis of assets that may be surplus to the Commonwealth’s needs.  The Finance and Administration Cabinet can assist in assessing the value and marketability of both real property and equipment items;  
4. The Finance Secretary is directed to work with all state agencies to identify strategies to reduce or mitigate increasing utility costs.  The Finance Cabinet is forming new strategies and a team of experts to assist agencies in reducing utility costs.  Both state-owned and leased locations are to be examined for economies.  Again, involvement and buy-in by agency leadership is critical to success in generating and sustaining savings in this area; and,
5. All out-of-state travel must be approved by the Finance Secretary.  Requests for out-of-state travel are to continue to be electronically submitted to the Office of the Controller in the Finance and Administration Cabinet through eMARS.  In-state travel is the responsibility of each Cabinet Secretary under the Executive Order; however, procedures will be issued to assure restrictions are applied uniformly and effectively. 

Below is a summary of the new procedures:

1. General Process.  In order to make this process as efficient as possible, a new Request Form has been designed.  The EO 2008-11 Request Form will replace the letters and memos and the Computer Acquisition Form (CAF) that agencies had been submitting for approval of all purchases.  The submittal process is as follows:
   • All information technology (IT) requests should be electronically submitted on the Request Form to: COT.ComputerAcquisitions@ky.gov.
   • All non-information technology requests should be electronically submitted on the Request Form to:  Finance.EO2008-11@ky.gov.
     FAC review occurs weekly on Thursdays -- requests must be received by noon Wednesdays.
2. Threshold for Approval.  The Request Form is designed to permit agency submittal of all types of new and modified contracts, and any other procurement method for the acquisition of items or services.  The form allows the agency to clearly state the circumstances and need for the proposed purchase, and to specify the planned approach for making the acquisition.  The threshold for submission of requests for any contract or purchase is set at $1,000.  If the contract or purchase exceeds $1,000, it must be submitted on the form.  Agencies shall not use split purchasing, or any other methods, to artificially circumvent this requirement.
3. Examples of Contracts.  Contracts and modifications to be submitted for review include any contract for professional or non-professional services, construction, leases, or commodities, when the contract exceeds $1,000.  Agencies shall obtain FAC approval prior to the issuance of any solicitation for such contracts.  Memoranda of Agreement (MOAs) also require review by the FAC.  Agencies are reminded that all Personal Service Contracts (PSCs) for legal services must still be first approved by the General Counsel in the Governor’s Office.
4. Examples of Purchases and Payments.  Purchases to be reviewed include equipment and furniture, delivery orders, Kentucky Correctional Industries (KCI) and Surplus Property purchases, vehicles, and all commodities and services.  Replacement items, even for items that are lost or damaged are to now be submitted.  Agencies must obtain approval prior to their submission of a procurement or payment document in eMARS.  For purchases and payments less than $1,000, authority is delegated to each Cabinet Secretary or Agency Head to establish procedures for careful internal review and approval.  In addition, purchases/payments of utilities (water, sewer, gas, electric, trash disposal, etc) will not require FAC approval.  However, Cable TV service is still to be submitted, if the cost exceeds $1,000 annually.  Any payments that reference an already established contract, other than an MA, do not need to have forms submitted to the EO 2008-011 Committee.  These can be processed without a form submission.  The existing contracts that are in place do not require EO review, unless an amendment is made to them, which would increase the dollar amount that was approved by more than $1000.  Delivery orders or payments made directly against MAs > $1000 do require an approval from the E.O. Review Committee.
5. Cabinet Secretary Approval.  All Request Forms, although electronically submitted, must indicate the personal approval from the appropriate Cabinet Secretary or Agency Head, and a signed hard copy of the document shall be maintained in the agency.  When FAC approves, an electronic copy of such will be returned to the agency and must be attached to the eMARS document submitted to the Office of Procurement Services to execute the procurement (such as the DO or RQS).  The requirements are the same if the purchase involves special authority awards -- PO, PO2, CTT, CTT2 documents --or direct payments (PRCs). 
6. Blanket Waivers.  Recognizing that some contracts and purchases represent routine expenditures, agencies may request a blanket waiver from recurring submittals.  The Request Form provides agencies the opportunity to apply for a waiver from review and provide explanation and justification of the special situation.  For instance, there may be specific federal or state statutory requirements that mandate disbursements through MOAs with other public entities, or the agency may have the need to make ongoing purchase of certain commodities, such as food items for Parks cafeterias.  These must be specific and limited to clearly defined situations or programs.
7. Steps after Approval.  FAC approval of a Request Form means the review required by the Executive Order has been completed, and the items or services have been authorized to begin the procurement process.  It does not mean that any procurement rules are dispensed with.  Agencies must procure these items or services with approved methods (i.e., Requisition, Order from Existing Agreements, Small Purchase, Agency Authorization, Approved Special Authority, etc).  All documents > $1000 require the approved EO 2008-011 form to be attached at the header to verify that these procurements have been reviewed and approved as essential to the delivery of service.  If a blanket waiver has been approved, a copy of the approved EO 2008-011 form must be attached to each applicable document.  Attach the approved Excel version of the form since PDF and JPEG files take up more space on the eMARS server. If creating a payment for a contract that had previously been approved, enter document comments that the EO form is attached to the contract.  This will save space on the server too. 
8. Procurement Cards.  ProCards shall not be utilized to circumvent the Executive Order and this approval process.  If a purchase being made with a procurement card is for furniture or equipment or a purchase of like items over time totaling $1,000 or more, the purchase must be submitted in advance on a Request Form.

The Executive Order, this memorandum, an electronic version of the EO 2008-011 Request Form, and detailed instructions for completing the Request Form are posted on the FAC webpage at http://www.finance.ky.gov/.  Additional requirements relating to the Executive Order’s mandates on travel and printing will be provided in the next few weeks.