Purchasing Goods and Services

• Updated: March 2010
• Primary Contact : Tim Bray

Needed goods and services will be identified, selected, and acquired as economically as possible according to specified standards of quality and service, while giving responsible suppliers fair consideration. This should be done in a timely and organized manner that provides for the accountability of University expenditures. With few exceptions, Purchasing Services will conduct a competitive process to select vendors for single purchases $50,000 and over, AND for repetitive purchase requirements valued at $50,000 and over annually, AND for purchases $250,000 and over from U Wide contract vendors. Splitting purchases to avoid bidding is expressly forbidden. See Bid Requirements.

All purchases must comply with State laws, Federal laws and guidelines, University policy and the University of Minnesota Purchasing Code of Ethics.

Purchasing Services staff will document their commitment to ethical practices by signing a Purchasing Code of Ethics. Department personnel, who have purchasing responsibility, will document a commitment to ethical purchasing practices by signing a Code of Ethics for Department Staff Responsible for Buying.

Exclusions

University libraries may purchase materials in various formats, including micro formats and electronic formats, that are required for instructional or research purposes and become part of the library collection. University Bookstores may purchase resale items.

Purchases of goods, services and professional services between the University of Minnesota and University of Minnesota Physicians will not require review and approval from Purchasing or from the Board of Regents, but will instead be consistent with the Master Agreement for the Purchase of Goods and Services Between the University of Minnesota and University of Minnesota Physicians. The Master Agreement does not apply to lease of real property from one party to the other, or to sponsored research activities and related subcontractor relationships.

Special Situations

Purchases of goods, services and professional services from Fairview University Hospital will be handled in a manner consistent with University Purchasing Policy, but purchases from Fairview University Hospital that are related to research projects will not require bidding for any dollar amount.

To ensure quality, consistency, and control, University Relations has directed that all official University business cards and stationary be printed by University Printing Services (TC Campus), Printing Services (Duluth Campus) or Duplicating Services (Morris Campus).

Follow special procedures for purchases of restricted commodities:

• Lab Animals - Contact Research Animal Resources to purchase lab animals.
• Radioactive Isotopes - Contact Environmental Health and Safety to purchase radioactive materials.
• Alcohol for Research - Contact University Stores to purchase alcohol for research.

For controlled substances, see Administrative Policy: Using Controlled Substances for Research for information.

Departments with repetitive annual purchases from a vendor that exceed the bid threshold will submit a Requisition to Purchasing for competitive bidding.

Outsourcing activity, which creates the potential for displacing University employees, is governed by a special multi-step process.

In some instances, an exception to Bid Requirements may be in the University’s best interests. Examples of justification for an exception appear on the Price Comparison Form, used to document exceptions $10,000 to $49,999. Examples of justification for an exception also appear on the Request for Exception to Board of Regents Policy: Purchasing, used to document exceptions $50,000 and over. Justifications include such emergency situations as a threat to life, health and safety: an inability to deliver services to students, faculty, staff, etc: the threat of financial loss to the University, and other reasons.

Out of Pocket Purchase Provision

Occasionally, a special situation may arise where an unanticipated purchase is necessary, and circumstances make it impossible to use one of the approved purchasing processes (U Stores, P card, purchase order, etc.). In this situation, an employee should attempt to secure preapproval from their approving authority to make an out of pocket purchase. If circumstances do not allow for preapproval, the employee should use best judgment as to the appropriateness of an out of pocket purchase, then seek post-approval as soon as possible. With appropriate documentation and departmental approval, out of pocket purchases are reimbursable to the employee (assuming the purchase meets all other compliance and policy requirements for allowability and reasonableness).

Guidelines For Determining Appropriateness of Out of Pocket Purchasing

• The purchase is directly related to the employee's work
• The purchase could not be anticipated
• There is an immediate need for the goods/services
• An approved purchasing method cannot be used
• The price is "reasonable" (competitive in the marketplace)

  Note: The Out of Pocket method may not be used to purchase equipment exceeding $2499, or to purchase professional services of any dollar amount.

The employee should not invoke the University's tax-exempt status when making an out of pocket purchase. Since the University is not directly making the purchase, it does not apply. For approved out of pocket purchases, all sales taxes associated with the purchase will be reimbursed to the employee.

If the department's approving authority determines that one of the approved purchasing processes could have and should have been used, he/she should inform the purchaser of this, and may withhold approval of the reimbursement, which will prevent the purchase and the associated tax from being reimbursed.

See Examples of Appropriate and Inappropriate Uses of the Out of Pocket Method.

Purchasing during a University Emergency

In the case of a declared University emergency, the Director of Purchasing Services may suspend normal purchasing policies and procedures, including, but not limited to competitive bidding, and establish appropriate temporary procedures, in order to respond to the emergency and to ensure the continuity of the University’s business. The temporary purchasing procedures may apply to purchases directly or indirectly related to or affected by the emergency. These temporary purchasing procedures will apply until such time as the Director judges that normal purchasing procedures can be resumed.

To implement with Board of Regents Policy: Purchasing. This policy is necessary to ensure appropriate stewardship of University assets, integrity when acquiring goods and services, and accountability to funding sources.

• Planning Purchases
• Purchasing Goods and Services
• Receiving Purchases

• no code assigned: Price Comparison for Purchases of Goods and Standard Services $10,000 to $49,999 (DOC)

• Price Comparison for Purchases of Goods & Standard Services $10,000 to $49,999
• Purchase Order General Terms and Conditions
• Request For Exception to Board of Regents Policy: Purchasing (PDF, Word)
• Code of Ethics for Department Staff Responsible for Buying
• Request to Procurement Specialist

The following forms are issued by Purchasing Services only:

• Request For Bid
• Request for Proposal
• Bid Referral Form

Addendum

Usually refers to a request to change a Request for Bid (RFB) or a Request for Proposal (RFP) prior to the due date and time.

Basis for Price

Explains how the vendor or contractor arrived at the dollar amount to charge the University when standard price list and catalogs are not available.

Basis of Vendor Selection

Explains why a department has chosen a specific supplier over other potential suppliers of a good or service.

Bid Threshold

Dollar amount, set by administrative policy and reviewed biennially by the Board of Regents, at and over which purchases must be competitively bid.

Blanket Order

A price agreement with a vendor establishing prices, discounts, or other terms, which will be in effect for a specific period of time, usually at least one year.

Equipment

Physical resources or fixed assets for the University such as: machinery, apparatuses, instruments, etc. Equipment that costs $2,500 or more is considered capital equipment.

Freight On Board

Indicates the point at which the ownership or title of the goods transfers from the vendor to the customer.

Non-PO-Related Purchases

A list of items and services that departments may purchase directly from the vendor without competitive bidding or issuance of a purchase order.

Professional Services/Consulting

Specialized services that require intellectual or creative expertise, often original in character. Examples of professional services are artistic design services, editorial services, executive search services, audit services, and software development.

Purchase Order (PO)

Document used to order a product or service from an external vendor.

Reasonable Price:

A price that can be shown to be not excessive and consistent with current market prices. Reasonable price may be ascertained by sending a Request for Bid (RFB) or Request for Proposal (RFP) to three or more competitors and comparing bids/proposals, or by comparing a quoted price to one or more of the following:

• Comparison to previous purchases
• Comparison to peer institution's purchase
• Comparison to similar purchases
• Cost / Price breakdown of all charges + markup
• Knowledge of the market

Request for Bid (RFB)

A competitive process initiated through Purchasing Services. An RFB requests bids for specific goods or standard services from vendors. The purchase order or contract is awarded based on the lowest price meeting the stated specifications.

Request for Proposal (RFP)

A competitive process initiated through Purchasing Services. An RFP requests solutions from several or many vendors. The award is made to the vendor offering the best proposal or solution based on the stated evaluation criteria, one of which is price.

Split Distribution

A method to identify more than one account to pay for a purchase.

Standard Services

Standard services are services that are routinely provided to a large number of customers usually at published rates without significant customizing. Firms rather than individuals are likely to provide these services.

Examples of standard services are dry cleaning, extermination services, equipment maintenance, laboratory testing services, lawn care, and courier services.

Supplies

Consumable items, provisions, etc. Examples of supplies are pens, paper, beakers and chemicals.

University-Wide Contract

A contract negotiated by Purchasing Services, with prices, terms, and conditions available for use by all campus locations within the University. See University-Wide Contracts website. With the exception of U-Wide Contracts for printing, departments may place individual orders with U-Wide Contract vendors up to $249,999 without bidding.

Buyers

Ensure that all purchases made by or through them will comply with applicable policies, laws, and guidelines and ethical practices. Adhere to Purchasing Services Code of Ethics.

Deans, Directors, and Department Heads

Ensure that all purchasing activity conducted in their units complies with applicable policies.

Director of Purchasing

Recommend policy changes. Establish and maintain University of Minnesota purchasing processes that incorporate compliance with applicable policies, laws, and guidelines. Oversee the competitive process for purchases over the bid threshhold. Provide assistance to University departments to ensure adequate vendor performance. Maintain a vendor relations program that includes new vendor orientation, a vendor access plan, and a vendor performance program. Provide a vendor environment that is inclusive, participatory and competitive. Establish purchasing contracts (discount agreements) with vendors. When appropriate, approve requests for exceptions to the Regents' Purchasing policy.

Report purchasing activity to the Board of Regents quarterly. Seek approval from the Regents, monthly, for all purchases of $1,000,000 and over.

University Staff involved in purchasing activities

Ensure that all purchases made by or through them comply with applicable policies and ethical practices. Learn and follow University purchasing procedures. Document unacceptable or exceptional vendor performance and notify Purchasing Services.

• Bid Requirements
• Bid Specifications
• Evaluating the bids - Identifying the Lowest Life Cycle Cost
• Examples of Appropriate and Inappropriate Uses of the Out of Pocket Method
• Non Purchase Order Related Payments

• Job Aid: Transaction Justification/Documentation Standards for All Non-Sponsored and Sponsored Transactions

There is no FAQ associated with this policy.

Board of Regents Policies:

• Alcoholic Beverages on Campus
• Board Operation & Agenda Guidelines
• Code of Conduct
• Individual Business or Financial Conflict of Interest
• Institutional Conflict of Interest
• Diversity, Equal Opportunity, and Affirmative Action
• Equal Opportunity
• Monumental Works of Art
• Purchasing
• Reservation and Delegation of Authority
• Selection of Design Professionals
• Targeted Business, Urban Community Economic Development, and Small Business Programs
• Wage Rates for Contractors

Administrative Policies:

• Hospitality & Special Expenses
• Purchasing a Professional Service
• Purchasing from Targeted Group Businesses
• Traveling on University Business
• Using Controlled Substances for Research
• Using the University Procurement Card

Other Related Information:

• OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements"
• OMB Circular A-21, "Cost Principles for Educational Institutions"
• Minnesota 15.43, Acceptance of advantage by state employee; penalty.
  
  

  Subdivision 1. Financial interest of agents. No employee of the state or of the University of Minnesota in direct contact with suppliers or potential suppliers to the state or the university, or who may directly or indirectly influence a purchasing decision or contract by establishing specification, testing purchased products, evaluating contracted services, or otherwise has official involvement in the purchasing or contracting process may:

  1. have any financial interest or have any personal beneficial interest directly or indirectly in contracts or purchase orders for goods or services used by, or purchased for resale or furnished to a department or agency of the state or the university; or
  2. accept directly or indirectly from a person, firm, or corporation to which a contract or purchase order has been or may be, awarded, a rebate, gift, money, or anything of value other than items of nominal value. No such employee may further accept any promise, obligation or contract for future reward. *University Purchasing considers $5.00 to be nominal value for purposes of avoiding conflict of interest in purchasing.

  According to State law (M.S. 15.43), violation is a misdemeanor.

• Minnesota 179A.01 and 179A.11, "External Subcontracting"
• Federal Acquisition Regulation

Amended:

March 2010 - Defined what circumstances justify faculty or staff making an out of pocket purchase and what may not be purchased out of pocket. Removed the dollar threshold for an out of pocket purchase. Provided for management discretion to withhold approval of the personal reimbursement if the authority determines that an approved purchasing process could and should have been used. Provided new language to provide for normal purchasing procedures to be suspended and emergency purchasing procedures implemented when a University emergency is declared. Expanded the explanation of bidding requirements and exceptions to bidding. Threshold for purchases requiring Board of Regents approval increased from $250,000 to $1,000,000.

Amended:

June 2008 - Policy completely revised to address the Enterprise Financial System rollout. Updated language in the Laws, Policies, Requirements of the Planning Purchases procedure. Appendix A and Bid Specifications added.

Amended:

February 2007 - Bid Threshold increased from $10,000 to $50,000 for non-UWide contract vendors. Changes made throughout policy to reflect this.

Amended:

July 2006 - Policy Statement amended to make it explicitly clear that splitting purchases to avoid bidding is expressly forbidden.

Amended:

April 2006 - Added the following to Special Situations: "Purchases of goods, services and professional services from Fairview will be handled consistent with University Purchasing Policy, but purchases from Fairview that are related to research projects will not require bidding for any dollar amount." Added Audit Committee Charter and Attorneys and Related Services Regents policies to Related Information.

Amended:

January 2006 - Updated definitions, responsibilities, procedures, forms and appendices. The policy statement was slightly abridged.

Amended:

December 2004 - Emergency Purchase limit increased from $200.00 to $500.00 in Special Situations section.

Amended:

January 2004 - Added Common Audit Recommendations - Purchasing & Disbursements to appendices.

Amended:

April 2002 - All references to "Special Payments" changed to "Non Purchase Order Related Payments".

Amended:

January 2001 - Appendices B and C updated to reflect current requirments for documentation and justification within the POT and PVA.

Amended:

February 1999 - Policy Statement wording change in 2nd paragraph. Third paragraph added with link to Departmental Code of Ethics.

Amended:

June 1998 - Added passes and tickets category to Special Payments table in Appendix B: Direct Purchase Procedures.

Amended:

February 1998 - Clarified the exclusions section to more accurately reflect the purchasing authority granted to University Libraries in the Regents Policy on Libraries and Archives.

Effective:

January 1998

Supercedes:

Purchasing and Restricted Commodities