Procurement Training

Introduction to Purchasing
at UC Merced
Presented by:
Karen Meade, C.P.M.
Principal Buyer
To provide participants with a basic understanding of…
Public contract law and UC policies and how they
relate to our purchasing activities at UC Merced
Purchasing fundamentals
Campus Purchasing procedures
Ethical considerations related to Purchasing
Purchasing Laws and Policies
Contract Formation
Battle of the Forms
Purchasing Terms and Considerations
Systems and Services
Procurement Methods
Purchasing Procedures and Process
Laws, Policies and Regulations that
Govern Purchasing
Sherman Antitrust Act (1890)
 First U.S. legislation enacted to curb concentrations
of power that restrict trade and reduce economic
Clayton Antitrust Act (1914)
 Supplement to Sherman Antitrust Act
 Established Federal Trade Commission (FTC)
Robinson-Patman Act (1936)
Laws, Policies and Regulations that
Govern Purchasing (con’t.)
Uniform Commercial Code (UCC)
 Adopted by 49 States
 Commercial transactions
 Does not cover services – Common Law
United Nations Convention on International Contracts for
the Sale of Goods (C.I.S.G.)
 Adopted by U.S. , Canada and 48 other major trading nations
 Unless a contract specifically provides for application of
alternate body of law, CISG will automatically apply if
buyer’s and seller’s countries have adopted it
 Differs from UCC.
Laws, Policies and Regulations that
Govern Purchasing
California Political Reform Act (1974)
Disqualification of participation if financial Conflict of
Interests are present
State of California Public Contract Code
100-10 (1981)
Protect the public from misuse of public funds
Provide qualified bidders with a fair opportunity,
stimulate competition
Prevent favoritism, fraud, and corruption
Laws, Policies and Regulations that
Govern Purchasing (cont’d.)
Bylaws and Standing Orders of the Regents of the
University of California
Regental Policies
Administrative policies issued by the President of
the University
BUS-43 Materiel Management
 UC Merced Campus Purchasing Policy & Procedure
Policies and requirements of the funding agencies
for Federal contracts and grants, and other
extramural agreements
Recent Legislation
SB 1467 & SB 41 – Conflict of Interest
 Employees as independent contractors
 Former employees and contracting limitations
 Follow-on contracts
SB 1386 – Privacy
Employee-Vendor Relationship
 Financial Interest >10%
 Conflict of Interest Form
Law of Agency
Body of law that governs agents
 Authority to Contract
Law of Agency
Agent - an individual who is authorized to act for
someone else in business dealings with a third
 For purchase transactions, who are agents for the
 Purchasing Directors
 Buyers
 All individuals that are authorized / delegated
authority to place orders for the University
(Authority is not delegated to departments!)
Law of Agency
 Express (actual authority)
 Written (UC Merced delegation)
 Oral
 Implied (customary/apparent)
 Usual course of Business - customary
• Prior practice of individuals - apparent
Purchasing’s obligation regarding
Unauthorized (After-The-Fact)
Example of Authority
Mark Smith is a clerk at XYZ company.
Mark has been purchasing office supplies and
occasionally, office equipment from ABC
company. A salesman from ABC offers
Mark a deal on 25 calculators and Mark signs
the sales contract form. When Mark tells his
boss, the boss calls on the salesman and tells
him that Mark is not a buyer and does not
have the authority to enter into a contract.
Is there a contract?
Example of Authority, cont.
When an agent with authority (express or implied)
makes a contract with a third party which binds
the agent’s principal, THERE IS A BINDING
Formation of a Contract - Five Elements
Offer and Acceptance
Competent Parties
Legality of Purpose
Offer and Acceptance
Offer and acceptance in the eye of courts
has to do with a “meeting of the minds"
and conduct. Absent any written contract,
the courts may judge that a contract existed
if it can be established that there was mutual
assent relative to the matter in question.
A promise or commitment to do or not to do a specified
thing in the future.
Advertisements, circulars, price sheets or generally not
offers- they are an invitation to negotiate.
Can be made by a buyer or seller.
Purchase Order, Bid, Quotation (depends on terms), Letter
of Intent
Offer, cont.
May lapse
 May be rejected
 May be rejected by a counter-offer
 May be revoked
 May be accepted
Occurs when the person to whom the offer is made
exchanges their own promise or performance for the
promise made in the offer
For Sale of Goods-3 ways to accept
 By words of acceptance (bilateral)
 By the supplier’s act of prompt shipment (unilateral)
 By the promise of shipment (bilateral)
• e.g., Acknowledgement
Mailed acceptance becomes effective upon mailing.
Parties must consent and intend to contract
Consideration embodies a mutuality of obligation,
and can also be a forbearance (agreement NOT to
do something).
 Money
 Goods
 Forbearance (not doing what one has a legal
right/obligation to do, such as “I will pay you
$1,000 not to build a road next to my fence.”)
 Return promise
Competent Parties
The parties to contract must be of legal age,
not insane, and not mentally impaired by
foreign substances (drugs or alcohol). Or
under duress (threat or exercise of force)
 Misrepresentation or fraud
 Insanity
 Minor status
Legality of Purpose
Contracts for illegal purposes are not enforceable.
Contract Formation—Offer and
Acceptance, example
A seller sends you a quotation with a very good price
on the front and many unattractive terms and
conditions on the back of the form. One of these
terms states that the buyer is responsible for
payment of freight. You send a PO to the seller
and reference their Quote #. Seller invoices you
and includes freight. Is there a contract? Whose
terms and conditions, including freight govern?
Contract Formation—Offer and
Acceptance, example
It is very important for the buyer to make clear when
he is accepting a seller’s quotation that he is
accepting only the price, not the terms and
conditions of the quotation.
“Your quotation of (date) for (Product) is accepted,
provided, however, exception is taken to your
terms and conditions.”
Contract Formation
Implied-In-Fact Contract
 Some of the formal elements occur
through conduct rather than words.
e.g.. Taking your car to a car wash and
giving your keys to the attendant.
Contract Formation
The law requires all contracts for the sale of
goods over $500 to be evidenced by a
“writing signed by the party to be charged”
in order to be enforceable.
Contract Formation
Some companies might have a policy for
not issuing a Purchase Order under $2500
because they feel they are not of significant
enough value or they are unimportant.
Contract Formation
Remember—The value of a Purchase Order
is not just the cost of the item, but the risks
 Terms and conditions?
 Example: A phone order of $200 for
photography services. Are there any
Contract Formation
“Get it in writing, put it in writing, and
make the writing as complete, clear and
comprehensive as possible”
Battle of the Forms
Parties will use "boilerplate" language to
govern the terms of a sale.
 The buyer, for example, will send a
purchase order with a set of boilerplate
 The seller usually responds with an
acknowledgment and invoice with another
set of boilerplate terms.
Battle of the Forms, Whose
Terms and conditions Govern?
Conflicting terms always cancel out one
 Additional terms become a part of the
contract. In other words, you are stuck with
the additional terms on the seller’s form, or
they are stuck with yours.
Battle of the Forms
Whose terms and conditions govern?
A buyer sends out a Purchase Order that does
not list any terms and conditions. The seller
responds with a sales acknowledgement with
one term, a disclaimer of warranties.
 Do you have a contract?
 Do you have any warranties?
Battle of the Forms
Yes, there is a contract.
“No warranties” becomes a contract term..
Other Purchasing/Contract Terms
and Considerations
Most orders are taxable
(Even if supplier doesn’t charge tax)
 Tangible goods/services
 Out-of- State purchases
Non-taxable orders
 Resale orders
 Non-taxable services
 Non-tangible software
 Federal Government has title
Buying for UC Merced
Procurement System/Services
 UC Merced Online Purchasing System
 Hosted by UCLA
 Customized for UC Merced
UC Merced Purchasing Team
 Cindi Deegan, C.P.M., Director of Purchasing
 Terry Thun, A.P.P., Principal Buyer
 Karen Meade, C.P.M., Principal Buyer
 Denise Garcia, Principal Buyer
 Jackie Mendez, Buyer
UC Merced Accounts Payable Team
Your Accounts Payable Team
Located at UCLA Accounting Department
 UC Merced Dedicated Team
 Jennifer Chhoeung, Team Leader
 Processes all UC Merced Invoices and Payments
Team Objectives
Satisfy End-User Requirements
Achieve Maximum Value
Minimize University Risk and Liability
Ensure Compliance with Federal & State Laws
and UC Policies
Further UC Merced Programmatic Goals
 Environmental Sustainability
 Economic Development of Local Region
Procurement Methods
Departmental Orders
 Low Value Order (LVO) = “N” class order
 Blanket Order Release = “A” class order
 Special Class Orders = “X” & “T” class orders (which are
used for utilities, training, travel…)
 Procurement Card
Petty Cash
Recharge (through other department or campus)
Purchase Requisition
 Regular “R” requisition = “P” class PO issued by Purchasing
 Blanket “J” requisition = “B” class PO issued by Purchasing
Low Value Orders
Low Value Orders (LVOs)
 Orders issued by individuals in departments that
have been delegated Purchasing authority.
 Order limit is $5,000 per vendor, per day.
 Non-restricted items only.
 Complete/post order at time of vendor
Restricted Items – LVO
(partial list – see LVO policy)
Agreements/Contracts that require signatures
Controlled Substances, Radioactive substances
Alcohol (ethyl alcohol)
Independent Contractor Services (other than one-time repair),
Consultants, Professional Services, etc.
Communications (phone system, etc)
Items from employee or near relative
Firearms, explosives, and ammunition
Installation requiring contractor’s license
Lasers, X-ray and safety equipment
Lease purchases
Purchase Requisitions
Purchase Requisition
 Submitted Online by Department Preparer via CatBuy.
 Provides Purchasing approval to commit funds.
 Back-up information (quotes, proposals, scope of work
etc.) attached to “R” (regular purchase) or “J” (blanket
purchase) Requisitions in CatBuy .
Requisition/Order Specifications
Defines statement of needs – End User
Describes what buyer buys and what supplier
Will be the basis for the contract.
 Functional - defines task or desired result
 Technical - physical characteristics
 Performance - capability, performance
Specifications, cont.
Specifications for Goods
 Detailed description of goods
 Model number or equal*
 Installation
 Training
 Services
 Date needed
Specifications, cont.
 Specifications
for Services
Statement of Work (SOW) – may also be
referred to as Scope of Work
 Contract term/Period of performance
 Frequency of service, Response time
 Deliverables
 Payment terms (progress, monthly, upon
Purchase Orders
(common types)
Regular Purchase Order (Class “P”) (w/encumbrance)
 One-time purchase
Blanket Orders (Class “B”) (w/o encumbrance)
 Long-term contracts
 Repetitiously purchased goods/services
 Departments issue releases against
 As-needed basis
 Higher release limits
 Fixed pricing, terms, and conditions
 Department specific or Campus-wide
Procurement Methods - Purchasing
Requirements < $100,000 (effective 01/01/11)
Informal Bids
Requirements > $100,000 (effective 01/01/11)
Formal Bid Process
 RFI (Request for Information)
 RFQ (Request for Quotation)
 RFP (Request for Proposal)
 Negotiations
Competitive Bidding Requirements
UC policy requires formal competitive
bidding for all requirements $100,000 and
over unless…
 Sole source/unique product or service
 Match-existing
 Professional or personal service
 Award to lowest responsive, responsible
A responsive bidder is one who has
submitted a quotation, bid, or proposal that
is determined to be in substantial
conformance with the specifications,
delivery requirements, and conditions
prescribed in the request for quotation, free
of material mistakes or errors.
A responsible bidder is one who is capable in
all respects to perform the contract
requirements (factors that are considered
include financial resources, past performance,
technical skills, organizational structure,
personnel, equipment, delivery capacity,
facilities, client base, etc.).
Basis of Award
(used for RFQs, RFBs)
cost-per-quality point
(used for RFPs)
Sole Source Justification
UC /UC Merced requires sole source justification, in
writing signed by end-user/end-user department.
 Form available online or in Buyer guide.
 Focus on why unique features are critical to specific
 Avoid justifications based on quality & price formal bidding provides that determination.
 Match-existing requirements must be
 Requires Purchasing approval.
What Can You Negotiate?
 Education/Academic discounts
 GSA discounts or CMAS discounts
 Volume discounts
 Price Protection
Favorable Terms and Conditions
 Payment
 Guarantee
 Warranty
Used or refurbished
Other Cost-saving Techniques
Product substitution
 Alternate brands
 Demo/refurbished equipment
Annual contracts
Year-end/Sales quarter-end purchases
Always Remember….
Win - Win
Unauthorized Purchase/
After-The-Fact Purchase
Purchase transactions that are entered into
by an individual that is not duly authorized
to contract for the University.
Purchase transactions that are entered by a
person who is authorized to contract but
who exceeds their delegated authority or
uses an unauthorized procurement method.
Unauthorized Purchase/A.T.F., cont…
An individual may be personally
responsible for payment of charges
incurred by an unauthorized
 Time constraints do not constitute a
reason for an unauthorized purchase
 If there is an emergency, call
 Partnership = Department + Purchasing
(working together)
Order Documentation/Justification
Vendor Selection (Basis of Award)
Price Reasonableness
Vendor Qualification/Selection
 Sourcing methods/tools
Business Information Form
Substitute W-9 form
Strategic Sourcing suppliers
Small & local businesses
Disabled veteran business enterprises (DVBE)
Conflict of Interest issues
Vendor Selection
Vendor Selection
 Multiple Quotes
 Sole Source
 Match existing
 Only known source
 Emergency Purchase
 Agreement Source
 Best Source
Price Reasonableness
A reasonable price is one that does not
exceed that which would be incurred by a
prudent person in the conduct of a competitive
Price Reasonableness
Multiple Quotes/Bids
Price previously paid
Vendor certifies lowest price
Market knowledge/Professional judgment
Educational/GSA/CMAS pricing
Standard commercial price – no discounts
Vendor certifies lowest price
Cost/price analysis
UC Agreement
Order Documentation
Justification for Vendor Selection and Price
 All University orders are subject to audit.
 Order backup should be kept on file for a
period of 5 years after order is placed.
Checklist copy in Catbuy Buyers Guide will be available
online at
Process Timeline - Purchasing
 Negotiation
and Informal Bids
In general, one to two weeks to order
placement, but depends on complexity
 Formal
Six to twelve weeks to contract award
 Early involvement is key
 Emergency
Immediate turnaround
Completing the Process
Contract Award/Purchase Order Posted
 Order Documentation
 Goods Delivered to Central Receiving Department
 Central Receiving Delivers Goods to Department
 Payment is Processed by Accounts Payable
Avoid even the
appearance of anything
less than complete
integrity, objectivity,
and impartiality.
Ethics (cont’d.)
Would you like to read about it -- your
decision or action -- on the Merced
Sun Star’s front page?
Ethics (cont’d.)
 Supplier
Treat all suppliers fairly in all matters.
 Conduct complete and open bidding process.
 Don’t divulge competitor pricing until after
 Protect proprietary/confidential information.
 Do not knowingly take advantage of a Supplier
Ethics (cont’d.)
Anyone that buys for the University must
perform their roles in a manner that protects the
 Reputation and fairness are key characteristics
that must be established in the buying process.
Please . . .
DO NOT provide requisition numbers to suppliers.
DO NOT sign supplier paperwork/agreements.
DO NOT commit to a supplier unless you will be
awarding the contract.
DO NOT provide suppliers with budget
DO NOT communicate with suppliers during a bid
Please …
DO contact Purchasing with questions,
issues or suggestions.
DO provide input regarding supplier and
contract performance.
DO share your success stories.
DO let us know how we can better assist
you and your department .
Purchasing is your Resource for…
Locating Sources of Supply
 Suggesting Alternatives
 Discussing Policies and Procedures
 Providing Pricing and Product Information
 Discussing Legal Considerations
Can I help
 Creating Formal Bid Documents
Purchasing is your Resource for…
Assistance in Specification Development
 Supplier Pre-Qualification
 Accessing Insurance Requirements
 Determination of Best Procurement Method
 Contract Negotiations
 Assistance in Sole Source Documentation
 Facilitating Emergency Requirements
 Problem Resolution
Other Activities
Strategic Sourcing Initiatives
 Local Campus Contracts
 Sustainability Efforts
 Expanded Training Offerings
 Streamlined Procurement
 Supplier Outreach
Path Forward - Together
We strive to provide excellent service
to you, our campus customers. By
effectively working together, we are
able to maximize University value and
minimize University risk in the
procurement of your campus
Future Focus…
Simplify and Streamline Processes
 Increase Number of Strategic Contracts
 Enhance Communication
 Identify and Address Additional Training
 Continue to Maximize Value, Minimize
University Risk and Support Campus
Programmatic Requirements
Questions ?
Purchasing Website
An Invaluable Resource!
Questions ?
Thank you!

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