Part 6: Informal Procurement

1. Part 6: Informal Procurement Known as Small Purchase Procedures 2 CFR 200.320(b)

2. Federal Procurement Roadmap

3. Definition Small purchase procedures: Simple procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold.

4. What is the Simplified Acquisition Threshold? • AKA small purchase threshold • Dollar limit threshold after which you must complete a formal procurement • Federal and Oregon set at $150,000

5. What are small purchase procedures? Price or rate quotations must be obtained from an adequate number of qualified sources Adequate number of sources: Means more than 1 (one), preferably 3 (three) vendors

6. Advantages of using small purchase procedures

7. How do I get 3 competitive quotes? Answer: Use an informal procurement log! Example on next page.

8. Informal Procurement Log • Items that should be included on log: • Delivery details • Duration of quote • Product specifications • Estimated quantities • Information gathered from vendors • Signature and date of sponsor award

9. Types of award • All contractors must receive same information, including specifications • You can award on- • Line-item basis (individual item) • Bottom-line basis (lowest overall price for all items)

10. Records… • Just like all other procurement, records must be retained for 3 years plus current year. This information includes but is not limited to: • Copies of solicitation documents • Copies of letters, e-mails, faxes relating to the procurement • Name and dates of vendors contacted by phone, and reports on the results of meetings when the contacts were made in person • Copies of price or rate quotations received • Notification of the successful vendor • Any other documents (invoices, cancelled checks, etc.) relating to the purchase What can happen if I don’t keep procurement records?

11. The 7 steps to a good informal procurement

12. Step 1 – Vendor Inquiry • Before obtaining quotes: • Talk to prospective vendors • Seek out enough vendors • Build quality business relationships

13. Step 2 – Planning your Procurement • Draft solicitation document • Write down product specifications • Write down any other requirement for the procurement

14. Step 3 – Starting the solicitation process • Contact vendors (by phone, email, fax, in person, or mail) and • provide written specifications, or • If calling, read off the written specification • Provide the same language and specifications to each vendor • Sponsors should always use caution when verbally communicating • Written communication is preferred

15. Step 4 – Document vendor responses Write down in your purchase log the: • Vendor Name, • Contact Method, • Name of person providing the price quote, • The price quoted, • Date price quote was obtained and • Duration of price quote

16. Step 5 – Obtain price quotes from at least three (3) vendors Competition means more than one vendor • Two is the minimum and three is recommended • Aim to get more than three to maximize competition

17. Step 6 – Award the contract/purchase to the most responsive and responsible vendor with the lowest price What is a responsive and responsible vendor? • A “responsive vendor” is able to meet the requirements of the solicitation • A “responsible vendor” is willing and capable of furnishing the goods or services solicited.

18. Step 7 – Monitor invoices and products to ensure that bid prices, product quantity and quality are being honored • Monitor invoices • Sign off on purchases only after inspection • Product not matching specifications • Audit invoices to verify that the prices charged match the prices quoted • Variances should be documented and corrected • Note returns, exchanges and variances

19. Fragmentation - What is that? Splitting purchases by purchase the same item over a period of time to avoid the small or formal procurement method. This is not an allowable practice. Example- obtaining quotes each month for a product when the yearly aggregate cost exceeds formal threshold limit of $150,000 and does not meet micro-purchase procedures.

20. Scenarios using Small Purchase Procedures Sally wants to purchase a new freezer for her kitchen. She anticipates the cost will be around $8,000. Sally wants to complete an informal procurement because it will save her time versus completing a formal procurement. She contacts a local equipment vendor and asks them for their best price. She verbally agrees to purchase it from the vendor. The purchase was completed. Did Sally meet informal procurement requirements for this purchase?

21. Scenario 1: ANSWER: NO • Quotes must be solicited from at least two vendors, preferably three or more! • Verbal quote information must be documented in writing to justify procurement and retained for audit purposes.

22. Scenarios using Small Purchase Procedures Fred purchases the majority of his groceries from a distributor and he spends over $150,000 per year. However, he has local produce companies that can offer better produce for a lower price than his distributor. Fred spends about $50,000 total on produce for the year. Fred calls three vendors and asks for quotes on a variety of produce products. He writes the information down and awards to the vendor with the lowest overall price that met the specifications. Did Fred meet informal procurement requirements for this purchase?

23. Scenario 2: ANSWER: YES • You can segment purchases by category if there are responsible vendors available to support segmenting, allowing sponsors to obtain the best product at the best price. This is not considered fragmentation. • Fred documented the quote information received and awarded to lowest price vendor that best met the specifications.

24. Questions

25. Resources • ODE CNP Procurement webpage http://www.oregon.gov/ode/students-and-family/childnutrition/Pages/Procurement.aspx • 2 CFR 200.320(b) http://www.ecfr.gov/cgi-bin/text-idx?SID=c2e6ce95115ee25a91922be09c27ba2d&mc=true&node=se2.1.200_1320&rgn=div8

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