2. Discretionary Spending: How it Works

3. What is the Discretionary Spending Authority?
State Finance Law § 163(6)
Purchase services and commodities without a formal competitive process
Under $50,000: All agencies
OGS ($85k); SUNY ($125k/$250k)
$50,000-$200,000:
M/WBEs, SBEs, Recycled, NYS Food
Derives from SFL § 163(6)
Allows state agencies to purchase services and commodities without a formal competitive process
Two thresholds:
Under $50,000 – General Discretion
50k – 200k – can make award w/o formal process, but only to certain categories of vendors and must advertise and obtain OSC approval
Going to turn the mic over to Ken to get us started on Step 1.
OSC

4. (OGS) STEP 1: Identify Your Need
Consider order of priority and determine whether any of the following meet your need in the form, function and utility required:
Preferred Source Offerings
OGS Centralized Contracts
Agency’s own contracts
OGS

5. “Form, Function and Utility”
These are the minimum essential requirements that will meet the agency’s needs. These requirements are defined by the agency. Requirements may include quality, quantity, delivery terms, packaging, performance standards, and compatibility, among others.
OGS

6. Can the need be met by using Preferred Sources?
First
Can the need be met by using Preferred Sources?
OGS

7. First – Preferred Sources
Preferred Source status is granted to
Dept. of Corrections & Community Supervision –
Corcraft:
NYS Preferred Source Program for People who are Blind
NYS Industries for the Disabled:
Office of Mental Health:
First – Preferred Sources
OGS

8. Second Can the need be met by using
Office of General Services (OGS) Centralized Contracts*?
*Statewide contracts that are generally competitively bid or negotiated
OGS

9. Doing Business with New York State
Types of OGS Centralized Contracts
Commodities
Services
Technology
OGS

10. Can the need be met through Agency-Established Contracts?
Third
Can the need be met through Agency-Established Contracts?
If no Preferred Source, OGS Centralized Contract, or existing Agency-Established contract meets your need (form, function, and utility) ↓
Fourth
Agency conducts
its own procurement
OGS

11. STEP 2: Determine Cost Ask Yourself What is the estimated cost?
Is your estimated cost under the Discretionary Purchasing Threshold -
under $50,000 ?
$50,000 - $200,000 ?
One Year Rule
You’ve determined that you are eligible to conduct a new procurement
Ask yourself: What is this procurement going to cost?
Is that cost under either of the discretionary purchasing thresholds
When estimating your cost, you must follow the One Year Rule
OSC

12. Determination of Threshold Amount
One Year Rule
Determination of Threshold Amount
State Finance Law § 163(6-b):
State agencies must consider the total amount of expected purchases for the same commodity or service to be made within the twelve-month period from the date of purchase
expressly prohibits split ordering 
Can not change or a renew a discretionary purchase if the change or renewal would bring the aggregate amount for the twelve-month period over the discretionary threshold  
When estimating your cost, state agencies must consider the total amount of expected purchases for the same commodity or service to be made within the twelve-month period from the date of purchase.
Two scenarios that the One Year Rule was intended to protect against:
Agency purchases $40k of widgets in January using its General discretionary purchasing authority and then, in June, makes another $40k purchase of the same widget using discretionary purchasing - split ordering and it’s expressly prohibited
Agency makes a good faith determination that the estimated cost of the procurement will be $40k;
6 mos later, agency wants to amend the contract – if the amendment will bring the value over $50k, then your going to lose the level of discretion that you had when you entered into the contract.
OSC

13. STEP 3: Determine Vendor Pool
Estimated Annual Cost
under $50,000 – General Purchases
$50,000 - $200,000
Small Businesses: Commodities or Services
M/WBEs: Commodities or Services
Recycled or Remanufactured: Commodities or Technology
Food “grown, produced or harvested” in NYS: Commodities
If you’ve determined that your estimated annual cost is under $50k, you can make an award to any responsible vendor that meets your form, function and utility
If your cost is between $50 and $200k, you can only rely on your discretionary spending authority if you make an award to one of these four categories of vendors that are specifically enumerated in the statute
And that will ultimately depend on what the procurement is for: a Service, a Commodity, or a Technology.
I’m now going to turn it back over to Ken who is going to provide more detail on these four categories of vendors.
OSC

14. Doing Business with New York State
New York State Small Businesses
A New York State Small Business is defined in SFL §135-a as
Resident to New York State
Independently owned and operated
100 or fewer employees
Not dominant in its field
There is no certification process for “New York State Small Business”
NOTE: While they self-report, they are subject to post-audit by the procuring agency
We would recommend pulling a google search on them at the outset to check out their credentials.
OGS

15. Doing Business with New York State
Minority/Women- Owned Business Enterprises
A Minority/Woman-Owned Business Enterprise (M/WBE) must be certified by NYS Empire State Development in accordance with NYS Executive Law Article 15-A.
For information on the certification process, contact Empire State Development at or visit the website:
OGS

16. Recycled/Remanufactured & NYS Food
Recycled or Remanufactured Products: “commodities or technology that are recycled or remanufactured” (SFL §163(6))
Food Grown, Produced or Harvested in New York: “commodities that are food, including milk and milk products, grown, produced or harvested in New York State” (SFL §163(6))
OGS

17. Public Policy: M/WBEs Executive Law Art 15-A:
The Minority and Women-Owned Business Enterprise Certification Program was adopted in 1988 to address the underrepresentation of M/WBEs in state contracts – sets a goal
Over the years, ESD has commissioned disparity studies to look at the use of M/WBEs as state contractors. In 2010, the results of one such study were published, concluding that M/WBEs were not being used in state contracting as their availability would indicate they should be.
Art. 15-A is a remedial measure to address past discrimination against M/WBEs.
Since certified M/WBEs are one of the four categories of vendors eligible to receive purchasing contracts under the discretionary threshold, we thought we would briefly touch on some of the public policy that underpins these legislative efforts aimed at M/WBE participation in state contracts
This concept of increased M/WBE participation is also addressed in Art. 15-A of the Executive Law which was enacted to, among other things, require state agencies to set aspirational goals for M/WBE participation in state contracts
This resulted, in part, from disparity studies conducted by ESD over the years to look at the use of M/WBEs as state contractors. A recent study in 2010 concluded that M/WBEs were not being used in state contracting as their availability would indicate they should be
Art. 15-A was enacted as a remedial measure to address such underrepresentation.
OSC

18. Public Policy: M/WBEs
State Finance Law § 163(6) - Inclusion of M/WBEs in the discretionary spending authority is also a remedial measure.
Inclusion of M/WBEs in SFL § 163(6) is also a remedial measure aimed at increasing M/WBE participation.
OSC

19. STEP 4: Advertise Economic Development Law Art. 4C
Contract Reporter Ad required for $50,000 or more, unless an exemption applies
Procurement Council approved scripts
SFL § 163(6) states that agencies can use the discretionary spending “Pursuant to guidelines established by the state procurement council”
IMPORTANT FOR OSC APPROVAL
Agencies must submit ad at least 15 business days prior to bid/proposal due date
Next, we’re going to talk about how to advertise your procurement opportunity under the discretionary spending authority
You are required to advertise when the procurement is valued at $50 ,000 or more
Unless an exemption applies
The procurement council’s guidelines on discretionary spending provides three approved advertising scripts and you are going to want to use one of them
This is important for obtaining OSC approval since the statute requires that the discretionary spending authority be used “pursuant to the procurement council guidelines”
Finally, be sure to submit your ad for publication at least 15 business days prior to the due date for quotes; I believe that the ad itself must run for 15 days before an award can be made
OSC

20. ADVERTISING Approved Scripts
NYS Procurement Council Guidelines
Common Elements
Contracting Agency name
A description of the goods/services sought
The statutory authority for discretionary purchase
Here is a link to those procurement council guidelines on discretionary spending that contain the approved advertising scripts
I do want to mention that it is my understanding that at next week’s procurement council meeting, there is an agenda item that addresses these guidelines and proposes some revision including additional approved advertising scripts. So, you should go online and check the most recent version of the guidelines before making your purchase.
OSC

21. ADVERTISING Approved Scripts
Best Practices Language #1
Agency X intends to purchase (insert project description, i.e., 1,000 widgets) pursuant to its discretionary purchasing authority under State Finance Law §163(6), which authorizes purchases without a formal competitive process in certain circumstances, including purchases from New York State small businesses, from businesses certified pursuant to Article 15-A of the New York State Executive Law, if applicable, from businesses selling commodities or technology that are recycled or remanufactured or commodities that are food, including milk and milk products, grown, produced or harvested in New York State. Interested parties should contact (agency designated contact/purchasing officer) to discuss this opportunity.
What I did for today was put into the slides the three procurement council ad scripts that are currently in use for discretionary spending procurement opportunities.
I’ll give you a few seconds to read them over.
OSC

22. ADVERTISING Approved Scripts
Best Practices Language #2
Agency X intends to purchase (insert project description, i.e., 1,000 widgets), pursuant to its discretionary purchasing authority under State Finance Law §163(6). Interested parties should contact (agency designated contact/purchasing officer) for more details about this opportunity.
OSC

23. ADVERTISING Approved Scripts
Best Practices Language #3
Agency X intends to procure (insert project description, i.e., 1,000 widgets) pursuant to its discretionary purchasing authority under State Finance Law §163(6). This procurement opportunity is limited to New York State small businesses, businesses certified pursuant to Article 15-A of the New York State Executive Law, if applicable, businesses selling commodities or technology that are recycled or remanufactured or commodities that are food, including milk and milk products, grown, produced or harvested in New York State.
OSC

24. Additional Advertising Requirement for NYS Food Purchases
NYS Food Purchases – In addition to the contract reporter, SFL § 163(6-c) requires you to advertise on your agency website for “a reasonable period of time” and make the discretionary purchase based on the lowest price that meets the agency’s form, function and utility.
In addition to the Contract Reporter requirements, there is an additional advertising requirement for NYS Food purchases
Agencies must also advertise the opportunity on their website for a reasonable length of time
In addition, NYS Food purchases must be awarded on the basis of low price which, contrary to other discretionary purchases which we will talk about in a moment, are typically allowed so long as the price is shown to be reasonable.
OSC

25. STEP 5: Make An Award Remember: NOT a formal competitive process
No IFB or RFP
Prior to making an award:
Agencies use a Request for Quotes
Vendors provide quotes
Agencies can share price info, ask for better quotes (i.e., negotiate!)
OSC

26. Negotiate the Price This is an informal competitive process
When negotiating price, keep in mind:
Award need not go to the lowest quote, but the price must be reasonable
Exception: NYS produced food (SFL § 163[6-c])
When you are negotiating, remember that the award need not go to the lowest quote, but the price must be reasonable
Of course, with the exception for NYS Food purchases
OSC

27. Reasonableness of Price
What is reasonable? “Fair Market Price” - Always depends on the particular circumstances
Ex. 1: You pick the 2nd lowest quote and they are the only other quote w/in X% of the lowest – still need to justify not going to the low quote
Ex. 2: All others are within X% and you pick a higher-end quote, you need more to show the reasonableness of price (e.g. the proposed awardee is the only M/WBE and you want to meet agency goal under Exec. Law Art. 15-A)
If not the lowest quote - why it is in the best interest of the State? What are you getting that makes sense for NY that you are willing to pay more?
OSC

28. Reasonableness of Price
Methods for determining reasonableness of price:
Informal quotes (3 or more)
Cost to other governmental entities
Historic cost or price comparisons
Warning: may be outdated in some instances due to market changes
Some ways you can show reasonableness of price:
By obtaining 3 or more informal quotes – less than 3 it might be hard to show price is comparatively reasonable
By showing what the cost has recently been to other governmental entities
By showing historically what the cost has been; but be careful, this data could be outdated due to market changes
OSC

29. STEP 6: OSC Approval Sufficiency of Advertisement
Use one of 3 approved scripts
Justification of Vendor
Why is this vendor the right choice
Reasonableness of Price
Depends on particular circumstances
Vendor Responsibility
Over 100k – complete questionnaire at OSC’s Vendor Responsibility website:
Under 100k – verify responsibility otherwise (i.e., agency should represent they’ve done a review)
Finally, after you’ve made your award, you will be submitting to OSC for approval
I’ve touched on the main points that are important from an OSC Bureau of Contracts perspective …
Hand it over to KEN here
OSC

30. Recap
For purchases up to the Discretionary Buying Threshold, each agency must:
Ensure that the commodities and services acquired meet its form, function and utility needs;
Document and justify the selection of the vendor;
Document and justify the reasonableness of price; and
Ensure that the State buys from responsible vendors.
OSC/OGS

31. Resources NYS Procurement Council Guidelines
OSC’s Vendor Responsibility website:
OSC Bureau of Contracts: (518)
NYS Department of Ag & Markets
* If accessing the electronic version of this presentation, please copy and paste links into your browser.
OSC/OGS

32. Presenter Information
Sara Kenney
Division of Legal Services
Office of the State Comptroller
OSC Website:
OSC/OGS

33. Presenter Information
Ken Schultz
OGS Legal Services
NYS Office of General Services
OSC/OGS