Part 5: Micro –Purchasing Option 2 CFR 200.67 2 CFR 200.320 Welcome to Oregon Department of Education’s training on procurement. Part 5 is about Micro-Purchasing Option.

Objectives Define Micro-Purchasing Identify when Micro-Purchasing may be used Understand how to procure using Micro-Purchases As a result of listening to this training on Micro-Purchasing, the Sponsor’s staff will be able (click) Define Micro-Purchasing (click) Identify when Micro-Purchasing may be used (click) Understand how to procure using Micro-Purchases

Federal Procurement Roadmap All CNP Sponsors Is the purchase or contract worth more than $150,000 or the Sponsor’s Simplified Acquisition Threshold? Purchase/contract less than $150,000 Purchase/contract greater than $150,000 The Micro-Purchasing option is one of the methods of procurement. Micro-Purchasing falls under informal procurement process. In Part 1 – Procurement Overview, the ODE CNP Federal Procurement Roadmap was introduced. This roadmap presents a decision-making flowchart to help in determining which method of procurement to use. When the question: “Is the purchase or contact worth more than $150,000 or the Sponsor’s simplified acquisition threshold ” is answered no (click),then the informal process can be used. Under the informal process are two methods or procurement – Micro-Purchase option or Small Purchase. The Micro-Purchasing option is covered in this training. Informal purchasing is covered in part 6. Use Informal Process Use Formal Process Micro Small Competitive Proposals Sealed Bid

What is Micro-Purchasing? Micro-purchases: Less than $3,500 per transaction Spread purchases out among qualified suppliers No competitive quotes required 2 CFR 200.67 2 CFR 200.67 defines procurement by the micro-purchase method as the acquisition of goods, products or services for which the aggregate dollar amount does not exceed the micro-purchase threshold. Micro-Purchasing enables Sponsors to make purchases without obtaining competitive quotations, provided: (click) The aggregate value does not exceed $3500 per transaction. (click) Competition is achieved by distributing micro-purchases equitably among qualified suppliers. (click) Micro-purchasing may be awarded without soliciting competitive quotations if the operator considers the price to be reasonable.

Aggregate To combine several items Cost of all food service goods and services purchased in a single transaction Cost of all items together cannot exceed $3500 if Micro-Purchasing is used. Let’s take a look at each aspect of this definition to better understand what micro-purchasing is. The definition states that micro-purchasing is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the Micro-Purchase threshold. The term “aggregate” means the combination of several (typically different) items. In procurement terms, the aggregate dollar amount would be the cost of all food service goods, products or services purchased in a single transaction. A Sponsor may purchase products and services as a single, collective unit. The goods, products or services might be similar or dissimilar. The total or combined or aggregate costs cannot exceed $3500 in a single transaction. An example of products or services that might be purchased in a single transaction is office supplies. The office supplies might consist of copy paper, copy toner, pencils, pens and post-it notes. The items being purchased are different, but are combined as a single transaction. If the total amount of the items combined does not exceed $3500, then micro-purchasing may be used.

Transaction Two or more entities exchange goods, services or money Under an agreement formed for their mutual benefit Example: A Sponsor purchases milk, apples, carrots, bread, eggs, and ground beef from a single supplier at the same time. This is a single transaction. A transaction is an occurrence in which two or more entities exchange goods, services, or money between or among them under an agreement formed for their mutual benefit. The following examples illustrate transactions in the context of micro-purchasing: A Sponsor purchases milk, apples, carrots, bread, eggs, and ground beef from a single supplier at the same time. This is a single transaction.

Competition Awarded without soliciting competitive price quotations If the price is reasonable. Purchases within the micro-purchase threshold can be awarded without soliciting competitive price quotations if the price is reasonable. The Sponsor determines if a price is reasonable based on previous purchase, personal knowledge of the item being purchased or by comparison of similar items purchased.

Purchases Distributed equitably among qualified suppliers with reasonable prices. Two ways at the time of the purchase or over several purchasing events. To the extent practicable, purchases must be distributed equitably among qualified suppliers with reasonable prices.   This distribution of purchases among qualified suppliers can happen in one of two ways: at the time of the purchase or over several purchasing events. For example a Sponsor procuring apples may purchase them either: from various suppliers at the same time (the total of the purchases can’t exceed $3,500), or choose one supplier for the purchase of the apples and another supplier the next time applies need to be purchased (each of the purchases can’t exceed $3,500).

Reasonable Price Previous purchases Personal knowledge Comparison to similar Ways to verify the reasonableness of a price is to compare previous purchases, Have a personal knowledge of the item being purchased, or Compare the price to the cost of similar items to be purchased.

Recordkeeping Receipts Invoices List of vendors Records must to be kept for all purchases regardless of the procurement method used; including micro-purchases. Examples of records include store receipts, invoices, and list of available vendors with the schedule of rotation among the vendors

Distributing Micro Purchases Equitably Distribute purchases equitably - qualified suppliers May not purchase from only one source Written procurement procedures for rotating suppliers Sponsors who use micro purchasing must distribute the purchases equitably among qualified suppliers. This means that Sponsors using the micro-purchase method may not purchase from only one source. Rather purchases must be made using available qualified sources. This provides qualified sources the opportunity for business of “spreading the wealth”. No competitive price quotation is necessary for the purchase and no cost or price analysis applies. However the Sponsor’s written procurement procedures, as required in 2 CFR 200.318(a), must include a procedure that such purchases will be rotated among qualified buyers.

Example : Distributing the Micro-Purchase Equitably $1000.00 computer paper Three suppliers in the community Rotate purchase of computer paper among the suppliers. Let’s look at an example of micro-purchasing: a sponsor plans to purchase $1000.00 of computer paper. The Sponsor uses enough computer paper to make the purchase each quarter. In the community where the Sponsor operates the program, there are three suppliers who can provide computer paper. The cost of $1000.00 is less than $3500.00, which allows the sponsor to use the micro-purchase method. Since there are three suppliers in the community, the sponsor is required to rotate the purchase of the computer paper among those suppliers.

Difference Between Micro-Purchasing and Small Purchase Micro-purchase means an acquisition of products or services where the aggregate amount does not exceed $3,0 Soliciting competitive quotations not required The sponsor considers the cost(s) reasonable Single Transaction Less than $3500 for a single transaction Competition achieved by distributing transactions equitably. Micro-purchases comprise a subset of small purchase procedures, which are relatively simple and informal methods for acquiring products and services that do not cost more than the Simplified Acquisition Threshold. The Federal Threshold for small purchases is currently set at $150,000. The key differences between the regular small purchase method and micro-purchasing are that: (1) purchase orders may be awarded without soliciting any competitive quotations if the Program operator considers the cost (s) to be reasonable. (2) a Program operator may purchase products and services (similar or dissimilar purchased at once as a single, collective unit) whose aggregate cost is less than $3,500 in a single transaction without soliciting competitive quotations, if the Program operator considers the price to be reasonable; and (3) competition is achieved by distributing purchase transactions equitably among qualified sources. Specific products or services to which micro-purchase procedures may apply will vary among Program operators depending on their small purchase procedures. Regular small purchase procedures apply to procurements valued over $3,500 and less than $150,000.

Example 1: A Sponsor contracts for Janitorial service Weekly $100.00 per week The contract = $5200.00 Invoiced monthly Let’s look at some examples of Micro-purchasing: Example 1: (click)A Sponsor contracts for a Janitorial service to come in (click) weekly. The cost of the service is (click) $100.00 per week. (click) The contract is for $5200.00 and the sponsor is (click) invoiced on a monthly basis.

Example 1: Answer: No The Micro-purchase method cannot be used in this situation: The janitorial services are contracted on a yearly basis The value of contract for the year is $5200.00 The Small purchases standards apply in this setting Answer: No The Micro-purchase method cannot be used in this situation, because (click) the Sponsor is contracting for the Janitorial services on a yearly basis. (click)The value of contract for the year is $5200.00 and exceeds the micro-purchase threshold. (click)The Small purchases standards apply in this setting.

Example 2: A Sponsor: Shops weekly at a retail grocer The bill is less than $3500.00. Question: Should the Sponsor be getting quotes from other retailers and select the retailer with the lowest prices, or is this a micro- purchase? . (click) A Sponsor shops (click) weekly at a retail grocer, and (click) the bill is less than $3500.00. (click)The question is: (click)Should the Sponsor be getting quotes from other retailers and select the retailer with the lowest prices, or is this a micro- purchase?

EXAMPLE 2: Answer: Yes – Micro-Purchasing allowable Cost per transaction (weekly purchasing) is less than $3500.00 Not required to get quotes from other retailers the prices reasonable Distributes the purchases equitably among qualified suppliers Answer: (click)Yes – Micro-purchasing is an allowable option (click) Since the cost per transaction (weekly purchasing) is less than $3500.00, (click)the Sponsor is not required to get quotes from other retailers (click)as long as the Sponsor considers the prices reasonable. (click)The sponsor, to the extent practical, must distribute the purchases equitably among qualified suppliers.

Example 3 A Sponsor periodically signs a 3 year contract with a vendor. The 3-year contract cost per year = $2000 Total contract amount = $6000 Question: Is the threshold determined by the cost per year or by the total contract amount, in applying the procurement methods? A Sponsor periodically signs a 3 year contract with a vendor. (click)The 3-year contract cost per year is $2000.00 for a (click)total contract amount of $6000.00. (click) The question: (click) Is the threshold determined by the cost per year or by the total contract amount, in applying the procurement methods?

Example 3 Continued Answer: $6000 value of the procurement transaction as a whole, the small purchase standards apply 3 year contract for a total amount of $6000 exceeds the micro-purchase threshold (click) Given the $6000.00 value of the procurement transaction as a whole, the small purchase standards apply rather than the micro-purchase method. (click)Because the contract is for 3 years, the total amount of the contract is $6000.00, which exceeds the $3500.00 micro-purchase threshold.

SUMMARY What is Micro-purchasing Definitions of terms Requirements of Micro-purchasing Examples Part 5 on the Micro-Purchasing option provided information on What Micro-Purchasing is Definitions of terms The requirements of Micro-purchasing Some examples Micro-purchasing is one method of conducting procurement for purchases that total less than the Federal Threshold of $150,000 or Sponsoring agency’s simplified acquisition threshold if lower than the Federal threshold. It is an option for Sponsors to use when the conditions described in this part are met. If a Sponsor chooses not to use the micro-purchase method, then informal procurement for small purchases may be use.

Questions If you have any questions regarding this session please contact your assigned specialist.

Resources ODE CNP Procurement webpage CACPF Policy and Procedure Manual Chapter 14 2 CFR 200.67; 2 CFR 200.320(a) The resources listed on this slide may be found on the ODE CNP webpage.

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