PURCHASING 101

PURCHASING 101

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Remember to:

• Encourage Fair and Open Competition

• Purchase Best Value Goods and Services

• Obey the Law

• Act Only in the Public Interest

When Making Purchases for the State

Sections

• First Steps in Purchasing

• Small Purchase Rule ($1,000 or less)

• Purchases between $1,001 - $5,000

• Purchases over $5,000

• Sole Source Purchases

• Ethics & Penalties for Illegal Activities

SECTION 1 – First Steps in

Purchasing

Flow chart can be downloaded from purchasing.utah.gov home page. Click “Purchasing Forms” on the right and then on “Purchasing Flow Chart” under the heading “Agency Contract Information”

First Steps: Agency Contracts

Does your agency have a current agency

contract?

Purchase directly from the contract

Yes

No

• State Fleet Operations

• Utah Correctional Industries

• State Mail and Distribution

• Department of Technology Services

• State Print Services

First Steps: Mandatory Use Providers

Mandatory Use Providers

Is the item/service

available from another state

agency?

Yes

No

Executive branch

procurements units are required to use State Cooperative

Contracts when the contract offers

products/services that meet agency requirements.

First Step: State Cooperative Contract

Is the item/ service

available from a State

Cooperative Contract?

Yes

No

State Cooperative Contract:

Exception

Utah Procurement Code §63G-6a-408 (4)

(4) Except as provided in Subsection (5), an executive branch procurement unit may not obtain a procurement item through a small purchase standard procurement process if the procurement item may be obtained through a state cooperative contract or a contract awarded by the chief procurement officer under Subsection 63G-6a-2105(1).


ExceptionUtah Procurement Code §63G-6a-408

(5) Subsection (4) does not apply if:

(a) the procurement item is obtained for an unanticipated, urgent or unanticipated, emergency condition, including:

(i) an item needed to avoid stopping a public construction project;

(ii) an immediate repair to a facility or equipment; or

(iii) another emergency condition


ExceptionUtah Procurement Code §63G-6a-408 (5)

(5)(b) the chief procurement officer or the head of a procurement unit that is an executive branch procurement unit with independent procurement authority:

(i) determines in writing that it is in the best interest of the procurement unit to obtain an individual procurement item outside of the state contract, comparing:


ExceptionUtah Procurement Code §63G-6a-408 (5)

(A) the contract terms and conditions . . .

(B) the maintenance and service . . .

(C) the warranties . . .

(D) the quality . . .

(E) the cost . . .

. . . applicable to the procurement item under the state contract with the contract terms and conditions applicable to the procurement item if the procurement item is obtained outside of the state contract;

State Cooperative Contract

Utah Procurement Code §63G-6a-408 (5)

(ii) for a procurement item that, if defective in its manufacture, installation, or performance, may result in serious physical injury, death, or substantial property damage, determines in writing that the terms and conditions, relating to liability for injury, death, or property damage, available from the source other than the contractor who holds the state contract, are similar to, or better than, the terms and conditions available under the state contract; and

(iii) grants an exception, in writing, to the requirement described in Subsection (4).

State Cooperative Contract

Review of §63G-6a-408 (5)

(5)(b) the chief procurement officer. . .

(i) determines in writing that it is in the best interest of the procurement unit

(ii)determines in writing that the terms and conditions, relating to liability for injury, death, or property damage, . . . are similar to, or better than, the terms and conditions available under the state contract

(iii) grants an exception, in writing, to the requirement described in Subsection (4).

purchasing.utah.gov

Because State Cooperative Contracts

were created after a competitive

process, purchases made from the

contracts are NOT subject to the small

purchase rule in the next section.

State Cooperative Contracts

SECTION 2 – Small Purchase Rule

(No Bidding Required)

Is the total purchase more than $1,000 with only one possible vendor?

The agency must complete a sole source request and submit it with a quote from the vendor to State Purchasing. A sole source for a PO must also have an RQS number.

Sole Source

YesDoes the individual item(s) cost less than $1,000?

No

Yes

Are the individual item(s) more than $1,000 but less than $5,000 AND the total purchase will cost less than $5,000?

No

Yes

Is the total purchase more than $5,000 with multiple vendors available?

These are small purchases. The agency may select the best source without seeking competitive quotes. The complete procurement must total no more than $5,000 with each item in the procurement costing no more than $1,000. When using this process, the agency may not spend more than $50,000 in a fiscal year with an individual vendor. (UCA 63G-6a-408)

The agency shall obtain competitive quotes and purchase the item/service from supplier offering the lowest quote meeting specifications.

If all known vendors have been contacted and only one vendor offers a quote, the purchase is a sole source – proceed to the box below.

The agency shall enter an RQS (results in a purchase order) or an RQM (results in an agency contract). The agency does not collect quotes. Quotes/bids will be obtained by the Division of Purchasing.

Small Purchase Rule

Items under $1,000 do not need to be competitively bid

Small Purchase Rule applies

Yes

No

Does the individual

item(s) cost $1,000 or

less?

Individual procurement

threshold($1,000)

Single procurement aggregate threshold ($5,000)

Annual cumulative threshold ($50,000)

Small Purchase Thresholds

Individual Procurement Threshold:

The maximum amount that can be spent on one item under the small purchase rule

The threshold, or limit, is $1,000 for one item


Single Procurement Aggregate Threshold:

The maximum amount that can be spent at one time (a single procurement) with all individual items in the procurement being under $1,000.

The threshold, or limit, is $5,000 for the total purchase. You can buy many items under $1,000 in the same purchase as long as the total does not exceed $5,000.

Do not split a purchase in order to stay under the limit.


Annual Cumulative Threshold – the maximum amount that an agency can spend with a single vendor in one year using the small purchase rules.

When using the small purchase rules, the limit is $50,000 for a single vendor in a year.


Reminder:

Items bought through agency contracts or state cooperative contracts are NOT subject to the small purchase thresholds because the contracts were established after a competitive bid.


If a threshold will be exceeded, competition is required to obtain the procurement item.

Small Purchase Rule


threshold

Single procurement

aggregate threshold

Annual cumulative threshold

($1,000) ($5,000) ($50,000)

How to Purchase “Real” Items

1st – Agency Contract

3rd – State Cooperative Contract

4th – Small Purchase Rules (Watch the Thresholds)

2nd – Mandatory Use Providers

SECTION 3 – Purchasing Items $1,001- $5,000

(Bidding Required)

• Obtain competitive

quotes by phone/email

• Two quotes required but three quotes preferred.

• Keep all documentation for 5 years

• Name of all vendors

• Copy of quote

• Date of quote

• All other paperwork

Yes

No

Does the individual

item(s) cost between

$1,001 and $5,000?

Purchasing Items$1,001 - $5,000 (Bidding Required)

Telephone/Email Quote

Click above for document

DO NOT disclose any information of other quotes obtained – including price, delivery, brand, etc.

Telephone/Email Quote

• Do NOT tell the vendor

they are the winner until all internal processes are complete

• All agency procedures MUST be complete before awarding bid

Yes

No

Does the individual

item(s) cost between

$1,001 and $5,000?

Purchasing Items$1,001 - $5,000 (Bidding Required)

SECTION 4 – Purchasing

Items over $5,000(State Purchasing)

• Follow internal procedures

• Enter RQS (results in a purchase order) or RQM (results in an agency contract) in FINET

• Include description & approximate cost

Yes

Is the total purchase over $5,000 with

multiple vendors?

Purchasing Items over $5,000

Purchases over $5,000, must be sent to the Division of Purchasing for processing.

Work with your agency’s purchasing and finance offices to follow the correct process.


By State Purchasing

Send detailed specifications to State Purchasing

• Quantity required

• Date required (if applicable)

• Delivery location

• Other pertinent information

• Can include a list of recommended suppliers with vendor contact information, e-mail address & phone number


By State Purchasing

Just a reminder:

RQS can become a PO or a Contract

RQM can only become a Contract


By State Purchasing

Process for Procurement:

Informal Solicitation Less than $50,000

Formal Solicitation Posted for Public Notice on BidSync Items greater than $50,000 must be posted At discretion of State Purchasing agent, items less than

$50,000 can be posted


By State Purchasing

Common Procurement Methods for Formal Solicitation

• Request for Information (RFI)

• Request for Quotation (RFQ)

• Invitation for Bid (IFB)

• Multi-Step Bid (MSB)

• Request for Proposal (RFP)

• Sole Source

The State Purchasing Agent will work with you to determine which method is best for your requirements.Templates for Multi-Step Bid, RFP, and Sole Source are available at: http://purchasing.utah.gov/2012-08-30-20-32-26.html

http://purchasing.utah.gov/2012-08-30-20-32-26.html

• Make sure specifications are written to

obtain adequate competition

• Never let vendors write specifications

• Allow sufficient time for all internal agency procedures & State Purchasing procedures

• If you don’t know – please ask

• Keep good documentation on your purchases

Your Responsibility

Sole Source Procurement

• All known vendors contacted-only one bid

• If over $1,000, must be approved by the Division of Purchasing.

• A quote from the vendor MUST be submitted with the sole source request

First Steps: Sole Source

Yes

Is the total purchase over $1,001 with only one

vendor?

Sole source procurement shall be used only if a requirement is reasonably available from a single supplier. . . .


R33-3-401

Conditions for use of sole source procurement

Sole Source does NOT mean:

BEST source

PREFERRED source

MOST CONVENIENT source

FAVORITE source

CHEAPEST source


All sole source purchases over $1,000 must go to State Purchasing.

Sole source requests estimated to be $50,000 and above must be posted for a minimum of 7 calendar days for public comment.

Sole Source Requests

STATE OF UTAH - DEPARTMENT OF ADMINISTRATIVE SERVICES

Division of Purchasing & General Services 3150 State Office Building, Capitol Hill, Salt Lake City Utah 84114-1061 Phone: 801-538-3026 Fax: 801-538-3882 www.purchasing.utah.gov

SOLE SOURCE REQUEST Requests missing information will be rejected and returned to requestor for completion. Complete each section and provide as much information as needed to fully respond. Please click on the grey fields to insert your information. Use your tab key to advance to the next field. Please complete all fields below. Sole Source Procurement is appropriate only if a purchase requirement is reasonably available from a single supplier and if it otherwise qualifies under the attached Utah Administrative Code R33-3-401. ALL SOLE SOURCE REQUESTS OVER $1,000 MUST BE PRE-APPROVED BY STATE PURCHASING.

It is anticipated the procurement will result in a: (Check one and fill in the appropriate fields for an agency contract or the RQS number for a purchase order)

RESULT ACTION

Agency Contract

1. An RQM in Finet is NOT required. 2. Insert requested initial term of contract: (and renewal options): 3. Approximate Start Date: (cannot be prior to the date the sole source form is signed) 4. A Quote from the supplier is required. 5. Email this completed form along with a copy of the quotation from the supplier to

[email protected] prior to contract negotiations.

Purchase Order

1. An RQS in Finet is required. 2. Insert the RQS Number: 3. A Quote from the supplier is required. 4. Email this completed form along with a copy of the quotation from the supplier to the

appropriate State Purchasing Agent.

Department Requesting Authorization: Division: Contact Person and Title: E-mail Address: Telephone Number:

Description of Product / Service to be Purchased:

Total Estimated Cost (including all renewal periods):

Freight Cost (F.O.B. Destination, Freight Prepaid):

$0.00

Supplier Name: Contact Person: E-mail Address: Telephone Number: Fax Number: Ordering Address including Zip Code: Remittance Address: FINET Vendor Number (if available): All items in the above section are required with the exception of Freight Cost

Sole Source Request Form

Version10/23/2013

Always check purchasing.utah.gov for the most up-to-date form

A signed sole source

• Is NOT the same as a contract

• Once the sole source has been signed by State Purchasing, a contract MUST be created by the agency

• The contract must be signed by all parties including State Purchasing before any goods or services can be obtained

Sole Source Requests

Ethics & Penalties for Illegal Activities

Notice

The following information discusses matters

of law. You are strongly advised to consult

with your attorney regarding any and all

legal issues presented herein.

The Division of Purchasing and General

Services is not authorized to give legal

advice.

Dividing Procurements

Do NOT divide a purchase to stay under the thresholds

Small Purchase Rule


threshold

Single procurement

aggregate threshold

Annual cumulative threshold

($1,000) ($5,000) ($50,000)

(8) It is unlawful for a person to intentionally or knowingly divide a procurement into one or more smaller procurements with the intent to make a procurement:

(a) qualify as a small purchase, if, before dividing the procurement, it would not have qualified as a small purchase; or

(b) meet a threshold established by rule made by the applicable rulemaking authority, if, before dividing the procurement, it would not have met the threshold.

63G-6a-2305Penalties for Artificially Dividing a

Purchases

(9) A division of a procurement that is prohibited under Subsection (8) includes doing any of the following with the intent or knowledge described in Subsection (8):

(a) making two or more separate purchases;

(b) dividing an invoice or purchase order into two or more invoices or purchase orders; or

(c) making smaller purchases over a period of time.

(10) A person who violates Subsection (8) is subject to the criminal penalties described in Section 63G-6a-2305.


Purchases


Purchases

Dividing a procurement in order to remain under the small procurement threshold is fraud and is illegal.

If it is discovered that a person has intentionally or knowingly divided procurements, he or she can be charged as follows:

• Less than $100,000 = class B misdemeanor

• Between $100,000 and $250,000 = class A misdemeanor

• Between $250,000 and $1,000,000 = third degree felony

• Over $1,000,000 = second degree felony

• Shall be dismissed

Gratuities, Kickbacks,

Unlawful Use of

Position or Influence

• Be Independent

• Do Not Accept Gifts from Vendors

• Do Not Socialize with Vendors

• Do Not Play Favorites • Maintain Confidentiality

Ethical Actions

• Follow the Law

• Act Only in the Public Interest

• Remember - You are a Trustee of the Public’s Money

Ethical Actions

(1) (c) "Gratuity" means anything of value, including:

(i) money;

(ii) a loan at an interest rate below the market rate or with terms that are more advantageous to the person receiving the loan than terms offered generally on the market;

(iii) an award;

(iv) employment;

(v) admission to an event;

(vi) a meal;

(vii) lodging;

(viii) travel; or

(ix) entertainment for which a charge is normally made.

63G-6a-2304.5 Gratuities, Kickbacks, Unlawful Use of Position or Influence

(1) (g) "Kickback" means a gratuity given in

exchange for favorable treatment in a pending procurement or the administration of a contract.

(2) Nothing in this section exempts a person subject to the provisions of Title 67, Chapter 16, Utah Public Officers' and Employees Ethics Act, from complying with the provisions of the Utah Public Officers' and Employees Ethics Act.


(3) (a) Except as provided in Subsection (6) or (7), it is

unlawful for an interested person to give, offer, or promise to give a gratuity to:

(i) a procurement participant; or

(ii) an individual who the person knows is a family member of a procurement participant.

(b)Except as provided in Subsection (6) or (7), it is unlawful for a procurement participant to ask, receive, offer to receive, accept, or ask for a promise to receive a gratuity from an interested person.


(8) A person who violates this section is guilty of:

(a) a felony of the second degree if the total value of the gratuity or kickback is $1,000 or more;

(b) a felony of the third degree if the total value of the gratuity or kickback is $250 or more, but less then $1,000;

(c) a class A misdemeanor if the total value of the gratuity or kickback is $100 or more, but less than $250; or

(d) a class B misdemeanor if the total value of the gratuity or kickback is less than $100.


(1) . . .in addition to any penalty contained in any other

provision of law, a public officer or public employee who intentionally violates a provision of Section 63G-6a-2304.5, or Section 63G-6a-2305 shall be dismissed from employment or removed from office.

(3) Except as provided in Subsection (4), a public officer or public employee who intentionally violates a provision of this chapter is subject to disciplinary action, up to and including dismissal from employment or dismissal from office.

63G-6a-2306Penalties

Gratuities and Kickbacks Presentation

Cronyism: an anticompetitive practice

that may violate federal antitrust law.

Cronyism is a form of favoritism where

contracts (or purchase orders) are

awarded on the basis of friendships,

associations or political connections

instead of fair and open competition.

For further understanding, please see the training entitled “Gratuities, Kickbacks, & Undue Influence”

• Purchasing.utah.gov

• Click “Agency Training”

• Click “Gratuities, Kickbacks, & Undue Influence”

Gratuities and Kickbacks Presentation

Documents

PURCHASING 101