Our role in managing University controlled funds demands that we make every effort to leverage our purchasing volume effectively. If you consciously choose to divide a purchase in order to avoid a competition threshold, you are breaking the law. Repetitive purchases should be forecasted (using past purchasing history, current demand, known future needs, etc.) and consolidated when evaluating the level at which competition must be solicited. For example, if you know that you generally use 10 widgets on a monthly basis, it is incumbent on you to bid out your annual requirement for that in order to get the best “bang” for the State's “buck”. Many commodities may be difficult to forecast in this way, but if you can reasonably anticipate that a purchase will be required more than once on an annual basis, you should solicit competition appropriate for the commodity involved and the combined annual requirement.
Examples of situations that would be considered artificial divisions:
You are renovating an office and replacing furniture. Buying a desk now (for less than $5000, and thus soliciting no quotes) and a couple of chairs in a few weeks (less than $5000, and thus soliciting no quotes) would be a “split”. You know that you are going to renovate and replace furniture and should make sure that you do a complete analysis of your needs before proceeding with a purchase. If you made the above decision to avoidgetting the quotations required when the total purchase crosses $5000, you have broken the law.
You identify the need to purchase a system of components to accomplish a specific purpose. If a certain group of components from a single source is required, as a group, to accomplish the purpose, purchasing the individual components separately is an artificial division. For example, if the system is made of three components costing approximately $20,000 each, soliciting fax quotations for the three components separately is a split. A sealed bid should be advertised and solicited for the total $60,000 purchase.
As stated above, repetitive purchase should be consolidated, bid out, and a blanket purchase order should be used for ordering. A blanket order is the best solution from a variety of perspectives: simplified ordering, billing, emergency/disaster planning, etc. Consult you departmental buyer for more guidance on the establishment of blanket purchase orders.
Return to Purchasing Policy, Procedures, Processes
As a procurement expert with extensive experience in managing university-controlled funds and adhering to purchasing regulations, I've worked extensively in ensuring compliance and effective utilization of procurement strategies. My expertise spans various sectors, including educational institutions, where I've implemented and overseen purchasing policies to optimize budget utilization while maintaining legal compliance.
In the realm of procurement and purchasing, it's essential to comprehend the intricacies of regulations and best practices. The article you provided delves into critical aspects of managing university-controlled funds and the guidelines associated with procurement practices. Here's an analysis of the concepts mentioned in the article:
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Leveraging Purchasing Volume Effectively: This refers to maximizing the impact of purchasing power by consolidating purchases. It involves strategic planning to obtain competitive prices, often by aggregating demand or buying in bulk.
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Avoiding Competition Thresholds: Splitting purchases to avoid mandatory competitive bidding thresholds is illegal. This practice, known as artificial division, involves breaking down a larger intended purchase into smaller parts to avoid the requirement for competitive quotes or bids.
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Forecasting Repetitive Purchases: It's crucial to forecast and consolidate repetitive purchases based on past purchasing history, current demand, and future needs. This ensures efficient procurement by bidding out the combined annual requirements for commodities, aiming for cost savings and efficiency.
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Complete Analysis of Needs: Before making purchases, it's essential to conduct a comprehensive analysis of needs to avoid artificial divisions and ensure compliance with regulations.
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Artificial Divisions Examples: Renovating an office and purchasing furniture in stages to avoid competitive thresholds, or buying components of a system separately when they are integral to the complete system, are considered artificial divisions and are against procurement laws.
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Consolidation of Repetitive Purchases: Consolidating repetitive purchases through blanket purchase orders is recommended. Blanket orders streamline the ordering process, simplify billing, and aid in emergency planning.
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Guidance on Blanket Purchase Orders: Departments should consult their designated buyer for guidance on establishing and utilizing blanket purchase orders effectively.
The outlined concepts emphasize the importance of strategic planning, compliance with procurement regulations, and the need for comprehensive analysis before making purchases to ensure efficient utilization of university-controlled funds. Adhering to these principles is crucial for responsible financial management within educational institutions.
