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HUD Procurement Handbook 7460.8 REV 2
This handbook is originally from the U.S. Department of Housing and Urban Development (HUD)



                                                         Handbook No. 7460.8 REV 2

          CHAPTER 5.  SMALL PURCHASE PROCEDURES

5.1 General (24 CFR 85.36(d)(1))

Small purchase procedures are a simplified method for acquiring supplies, materials, 
and services (including professional and construction) that do not exceed the PHA’s 
small purchase threshold. These procedures are the simplest method of procurement and 
will be used for the vast majority of a PHA’s purchases. 

5.2 Small Purchase Dollar Limits
	A.	PHAs shall establish a dollar threshold for individual small 
		purchases in their Procurement Policy.  The threshold may not 
		exceed the Federal small purchase threshold (currently, 
		$100,000), or any lower dollar value set by the State or locality 
		having jurisdiction over the PHA.  In no case may the PHA adopt 
		a State- or locally-approved threshold that exceeds $100,000.  
	B.	PHAs may also establish a separate Micro Purchase threshold of up 
		to $2,000 per purchase.


5.3 Competition Requirements (24 CFR 85.36(c)(1))
	A.	Purchases Above the Micro Purchase Limit.  The PHA must solicit 
		price quotes from an adequate number of qualified sources 
		(generally defined as not less than three, except in the case of 
		Micro Purchases, below).  The PHA’s Procurement Policy shall 
		state any specific policy (e.g., requirement for three offers).

	B.	Micro Purchases.  PHAs may award Micro Purchases without soliciting 
		competitive quotations if the Contracting Officer considers the 
		price to be reasonable (e.g., based on recent research, experience, 
		or purchases).  To the extent practicable, PHAs shall distribute 
		Micro Purchases equitably among qualified vendors.

	C.	Prohibition Against Bid Splitting.  The Contracting Officer shall 
		not break down requirements aggregating more than the small purchase 
		threshold (or the Micro Purchase threshold) into multiple purchases 
		that are less than the applicable threshold (commonly called ‘bid 
		splitting’ or “unbundling”) merely to permit use of the small 
		purchase procedures or avoid any requirements that apply to 
		purchases that exceed those thresholds.  However, larger 
		requirements may be broken into smaller ones to afford small and 
		minority businesses the opportunity to participate in the PHA’s 
		procurements.  The Contracting Officer should document in the 
		contract file the reasons for breaking down larger requirements 
		into smaller ones.


5.4 Method of Solicitation

Quotations for small purchases may be obtained in writing (hard copy or email), 
orally, by fax, via catalogs, by letter, through electronic means, e.g., the 
Internet, through paid advertisement, or by displaying the solicitation in a 
public place.  The method should be 

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                                                          Handbook No. 7460.8 REV 2
                                                          
appropriate to the purchase (e.g., obtaining price quotes by phone for a commercially 
available supply item).  PHAs may establish in their Procurement Policies dollar 
thresholds or other requirements for the use of written and oral solicitations.  
Written solicitations are used when it is necessary to provide vendors with detailed 
information that cannot be conveyed orally (e.g., by phone), or with detailed 
quotation evaluation information.  The Contracting Officer should determine the best 
method, given the situation.                                                          
                                                          
5.5 Quotation Evaluation (24 CFR 85.36(f))

	A.	Price Reasonableness.  Before making an award, the Contracting 
		Officer must determine that the proposed price is fair and 
		reasonable.  For most small purchases, price analysis is 
		sufficient to make that determination.  In cases where the PHA 
		purchases services or items of a non-commercial nature (e.g., 
		a special training course designed for the PHA’s employees), 
		submission of cost details and a cost analysis may be needed 
		(see Chapter 10, section 10.3).  

		1.	Micro-Purchases.  Price analysis normally consists of 
			comparing the quoted price to prices recently paid for 
			the same or similar items, price lists, or catalog 
			prices. The signature of the Contracting Officer on the 
			Purchase Order or contract signifies the Contracting 
			Officer’s determination that the price is reasonable, 
			based on prior purchases of a similar nature or other 
			sources of information.

		2.	Other Small Purchases above the Micro Purchase Level.  
			Generally, price analysis will consist of a comparison 
			of quotations to each other and to other sources of 
			pricing information (e.g., past prices paid, catalog 
			prices, etc.).  If only one response is received, the 
			Contracting Officer should include a statement of 
			reasonableness in the contract file.  This statement may 
			be based on market research, comparison of the proposed 
			price with prices found reasonable on previous purchases, 
			current price lists, catalogs, or advertisements, a 
			comparison with similar items in a related industry, the 
			Contracting Officer’s personal knowledge at the time of 
			purchase, comparison to the ICE, or any other reasonable 
			basis. Only in rare cases would the Contracting Officer 
			conduct a cost analysis (a non-commercial type purchase 
			unique to the PHA’s needs, such as a training course for 
			PHA accounting personnel). 

	B.	Other Factors.  If using “price and other factors” to determine 
		award, the Contracting Officer has broad discretion in fashioning 
		suitable evaluation procedures.  In these situations, the 
		Contracting Officer should ensure that quotations can be evaluated 
		in an efficient and minimally burdensome fashion.  Competitive 
		proposal type procedures (e.g., formal evaluations, determining 
		competitive ranges, conducting detailed negotiations, or 
		requesting best and final offers) should not be used for small 
		purchases.  Contracting Officers may use information such as their 
		knowledge of, and previous experience, with the supply or service 
		being purchased, the vendor’s past performance for the PHA, or 
		customer surveys to evaluate the quotation.


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                                                          Handbook No. 7460.8 REV 2  
                                                          
	C.	Evaluating Contractor Responsibility.  PHAs must make awards only 
		to responsible contractors possessing the ability to perform 
		successfully under the terms and conditions of the proposed 
		procurement. For small purchases, where payment is generally made 
		only after full delivery/completion of the job, the Contracting 
		Officer has broad latitude in evaluating contractor 
		responsibility, including the Contractor’s personal knowledge of, 
		or past experience with, the vendor. The signature of the 
		Contracting Officer on the Purchase Order or contract signifies the 
		Contracting Officer’s determination of responsibility is 
		satisfactory.
	D.	Documentation (24 CFR 85.36(b)(9))

		1.	Purchases Above the Micro Purchase Threshold. 
			Documentation should be kept to a minimum.  PHAs 
			should retain information supporting their purchases 
			(paper or electronic) to the minimum extent and 
			duration needed for management review purposes 
			(tracking purchasing activity, etc.).  The following 
			illustrate the extent to which quotation information 
			should be recorded: 

			a.	Oral solicitations. The contracting office should 
				establish and maintain records of oral price 
				quotations sufficient to reflect clearly the 
				propriety of placing the orders at the price paid 
				with the particular vendor. In most cases, this 
				effort will consist merely of showing the names of 
				the vendors contacted and the prices and other 
				terms and conditions quoted by each.
 
			b.	Written solicitations.  Limit written records of 
				solicitations or offers to notes or abstracts that 
				show prices, delivery, references to printed price 
				lists used, the vendors contacted, and any other 
				pertinent information. 

			c.	Special situations. Include additional 
				statements— 

				i.	Explaining the absence of competition if 
					only one source is solicited; or 

				ii.	Supporting the award decision if other 
					than price-related factors were 
					considered in selecting the vendor. 

		3.	Micro Purchases.  If competitive quotations are solicited 
			and award is made to other than the low quote, 
			documentation to support the purchase may be limited to 
			identification of the solicited vendors and a brief 
			explanation for the award decision.
                                                             

5.6 Petty Cash Purchases

	A.	General. Petty cash funds are to be used for very small, one time 
		purchases. If utilized, petty cash funds should be established in 
		the PHA’s Procurement Policy and should be sufficient to cover very 
		small purchases over a reasonable period (for instance, one month).
	
	B.	Petty Cash Policy. A Petty Cash Policy must (1) be in compliance 
		with 24 CFR 85.36, including the small purchase method, 
		(2) establish the overall amount of the fund, (3) establish the 
		maximum amount for each purchase, and (4) either establish the 
		appointment of one or more individuals as Petty Cash 
		Administrators or the procedures for appointing such individuals. 


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                                                          Handbook No. 7460.8 REV 2


                                                           
5.7 Purchasing Cards

	A.	General. Purchasing cards (including debit or credit cards) are a 
		payment method and not necessarily a method of procurement, as 
		defined in this handbook. Purchasing cards can be helpful in 
		reducing transaction costs. Purchasing card usage, however, should 
		follow the rules for all other small purchases. For example, the 
		Contracting Officer may use a purchasing card for Micro Purchases 
		without obtaining additional quotes provided the price is considered 
		reasonable. However, for amounts above the Micro Purchase level, the 
		Contracting Officer would generally need to have obtained a 
		reasonable number of quotes before purchasing via a purchasing card. 

	B.	Card Management/Internal Controls. When using purchasing cards, PHAs 
		should adopt reasonable safeguards and procedures to assure that 
		they are used only for intended purposes (for instance, limiting the 
		types of purchases or the amount of purchases that are permitted 
		with credit cards). PHAs should also make sure that they have 
		guidelines for selecting merchants/vendors, tracking purchases, and 
		card payment/settlement procedures.


5.8 Bonding Requirements

There are no requirements for bid, payment, or performance bonds for small purchases. 

5.9 Purchase Orders

	A.	General. Most purchases under the small purchase method will be done 
		via a Purchase Order sent or given to the contractor to initiate 
		delivery of the item(s) or performance of the service(s). The 
		issuance of a Purchase Order by the PHA and its acceptance by the 
		contractor (either through performance or signature on the purchase 
		order) constitute a contract. It is crucial, therefore, that the 
		Purchase Order clearly specify the item(s) or service(s) being 
		purchased and the terms and conditions of the purchase. 

	B.	Form. Purchase Orders are usually issued on a standard PHA form. 
		While HUD does not prescribe any specific form, the Purchase Order 
		will generally contain information regarding scope of work/service 
		to be provided, price, delivery, method of payment, inspection, and 
		acceptance. However, additional terms and conditions may be added 
		depending on the nature and complexity of the work requested. 
		Mandatory provisions are listed below in paragraph 5.10.  PHAs 
		should make sure that they include all necessary contract clauses 
		in their Purchase Orders or in their Request for Quotes, providing 
		the latter are referenced, and made part of, the Purchase Order.


5.10	Standardized Forms/Mandatory Contract Clauses

	A.	General. Except in the case of bid specifications and contracts for 
		construction or maintenance work in excess of $2,000 (see paragraphs 
		B and C, below), small purchases, including purchase orders, are 
		subject only to the mandatory clauses contained in Table 5.1.
		        
		PHAs may be further bound by certain State or local requirements 
		(See Chapter 13). Other than these Federal, State or 
		locally-mandated provisions, PHAs should include language with 
		any small purchase that is necessary and appropriate, consistent 
		with good business practice.


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                                                          Handbook No. 7460.8 REV 2  
                                                         
In addition to Table 5.1, HUD has developed forms which contain the contract clauses 
required for small purchases related to construction and maintenance work.  The use 
of the Table and these forms are described in the paragraphs below.

	B.	Mandatory Requirements for Construction Contracts greater than 
		$2,000 but not more than $100,000.  PHAs must incorporate 
		the clauses contained in form HUD-5370-EZ, General Conditions 
		for Small Construction/Development Contracts, and the 
		applicable Davis-Bacon wage decision.  Form HUD-5370-EZ has 
		been designed for small construction jobs.  PHAs may use form 
		HUD-5370 in lieu of the HUD-5370-EZ if the former is more 
		appropriate given the nature of the work.
        
	C.	Mandatory Requirements for Maintenance Contracts (including 
		nonroutine maintenance work) greater than $2,000 but not more 
		than $100,000. PHAs must incorporate the clauses contained in 
		Table 5.1; Section II of form HUD-5370-C, General Conditions 
		for Non-Construction Contracts, and the applicable HUD wage 
		decision. 
	
	D.	Acceptable Methods of Incorporation. PHAs may utilize any one 
		or any combination of the following methods to incorporate mandatory 
		clauses and applicable wage decisions into bid specifications and 
		contracts. PHAs may:
    
		1.	Attach the Table 5.1, HUD form(s), and/or wage decisions, 
			as printed;
		
		2.	Incorporate the clauses/text of the applicable HUD form 
			and wage decision into other documents (e.g., into the 
			PHA’s own forms) that are bound/attached to the contract
			(and bid specifications, if applicable) or incorporated 
			by reference (see paragraph 3, below). 
		
		3.	Incorporate the clauses or HUD forms and/or any applicable 
			Davis-Bacon or HUD wage decision by reference. The 
			reference must be specific as to the exact clauses or 
			form(s) that are incorporated, and where the clauses or 
			forms(s) may be accessed or obtained (e.g., HUDClips, PHA 
			web site). A Davis-Bacon wage decision may be incorporated 
			by reference to www.wdol.gov and to the specific number, 
			modification number, and date of the wage decision. HUD 
			maintenance wage decisions are not available at HUD’s web 
			site; however, a PHA may post any applicable HUD wage 
			decision to its own web site and reference that site. PHAs 
			must provide hard-copies of any referenced clauses, forms, 
			and/or wage decisions on request.
                                                          


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                                                          Handbook No. 7460.8 REV 2
                                                          
 
                                                       
TABLE 5.1 MANDATORY CONTRACT CLAUSES FOR SMALL PURCHASES OTHER THAN CONSTRUCTION

The following contract clauses are required in contracts pursuant to 24 CFR 85.36(i) and Section 6002 of the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act.
HUD is permitted to require
changes, remedies, changed conditions, access and records retention, suspension of work, and other clauses approved
by the Office of Federal Procurement Policy. The PHA and contractor is also subject to other Federal laws including
the U.S. Housing Act of 1937, as amended, Federal regulations, and state law and regulations.

Examination and Retention of Contractor’s Records. The PHA, HUD, or Comptroller General of the United
States, or any of their duly authorized representatives shall, until three years after final payment under this contract,
have access to and the right to examine any of the Contractor’s directly pertinent books, documents, papers, or other
records involving transactions related to this contract for the purpose of making audit, examination, excerpts, and
transcriptions.

Right in Data and Patent Rights (Ownership and Proprietary Interest). The PHA shall have exclusive ownership
of, all proprietary interest in, and the right to full and exclusive possession of all information, materials, and
documents discovered or produced by Contractor pursuant to the terms of this Contract, including, but not limited to,
reports, memoranda or letters concerning the research and reporting tasks of the Contract.


Energy Efficiency. The Contractor shall comply with all mandatory standards and policies relating to energy
efficiency which are contained in the energy conservation plan issued in compliance with the Energy Policy and
Conservation Act (Pub.L. 94-163) for the State in which the work under this contract is performed.


Procurement of Recovered Materials

(a) In accordance with Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act, the Contractor shall procure items designated in guidelines of the Environmental Protection
Agency (EPA) at 40 CFR Part 247 that contain the highest percentage of recovered materials practicable,
consistent with maintaining a satisfactory level of competition. The Contractor shall procure items designated in
the EPA guidelines that contain the highest percentage of recovered materials practicable unless the Contractor
determines that such items: (1) are not reasonably available in a reasonable period of time; (2) fail to meet
reasonable performance standards, which shall be determined on the basis of the guidelines of the National
Institute of Standards and Technology, if applicable to the item; or (3) are only available at an unreasonable price.


(b) Paragraph (a) of this clause shall apply to items purchased under this contract where: (1) the
Contractor purchases in excess of $10,000 of the item under this contract; or (2) during the preceding Federal
fiscal year, the Contractor: (i) purchased any amount of the items for use under a contract that was funded with
Federal appropriations and was with a Federal agency or a State agency or agency of a political subdivision of a
State; and (ii) purchased a total of in excess of $10,000 of the item both under and outside that contract.


Termination for Cause and for Convenience (contracts of $10,000 or more).

(a) The PHA may terminate this contract in whole, or from time to time in part, for the PHA’s convenience or the
failure of the Contractor to fulfill the contract obligations (cause/default). The PHA shall terminate by delivering
to the Contractor a written Notice of Termination specifying the nature, extent, and effective date of the
termination. Upon receipt of the notice, the Contractor shall: (1) immediately discontinue all services affected
(unless the notice directs otherwise), and (2) deliver to the PHA all information, reports, papers, and other
materials accumulated or generated in performing the contract, whether completed or in process.


(b) If the termination is for the convenience of the PHA, the PHA shall be liable only for payment for services
rendered before the effective date of the termination.


(c) If the termination is due to the failure of the Contractor to fulfill its obligations under the contract (cause/default),
the PHA may (1) require the Contractor to deliver to it, in the manner and to the extent directed by the PHA, any
work described in the Notice of Termination; (2) take over the work and prosecute the same to completion by
contract of otherwise, and the Contractor shall be liable for any additional cost incurred by the PHA; and (3)
withhold any payments to the Contractor, for the purpose of set-off or partial payment, as the case may be, of
amounts owned by the PHA by the Contractor. In the event of termination for cause/default, the PHA shall be
liable to the Contractor for reasonable costs incurred by the Contractor before the effective date of the
termination. Any dispute shall be decided by the Contracting Officer.


                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
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                                                          Handbook No. 7460.8 REV 2  
                                                          
5.11 Use of Indefinite-Delivery Contracts

PHAs may avoid making repetitive small purchases by awarding indefinite-delivery 
contracts, sometimes referred to as “blanket” or “open-end” contracts.  
Indefinite-delivery contracts are used when the PHA has a recurring need (e.g., 
cleaning supplies), but needs to order supplies and services and have them 
delivered as needed within a specific time period (e.g., one year).  The contract 
specifies what the PHA may buy and establishes the prices.  The PHA then orders 
the supplies or services from the contractor as needed.  This type of contract 
avoids the administrative cost of making numerous separate purchases (see Chapter 
10, paragraph 10.1.C.3 for guidance on the use of these contracts).

5.12 Negotiations

Small purchases procedures are not sealed bidding.  Therefore, Contracting Officers 
may, and are encouraged to, negotiate price and other terms of purchases (see Chapter 
7 for more information on negotiations), when appropriate.  PHAs may not alter or 
negotiate changes to mandatory contract clauses (see section 5.10). 

5.13 Rejection and Notification of Unsuccessful Offerors

In the handling of offers that are not accepted, PHAs are encouraged to follow good 
business practices. For example, for many small purchases, and particularly Micro 
Purchases, vendors typically understand that if they are not notified fairly quickly 
of an award, they did not win the quote and a rejection letter is not necessary. PHAs 
should determine when such formality is appropriate.

5.14 Appeals

The PHA’s procurement policy should indicate the type of appeal processes to be used 
for small purchases. PHAs are encouraged to adopt informal appeal procedures for these 
types of purchases.


5.15 Receiving Goods/Services and Approving Payments

PHAs should establish systems for ensuring that the items required by contract are 
received in accordance with contract terms. Payments should also be processed 
promptly to allow for prompt payment discounts, where applicable, and to otherwise 
maintain good relations with contractors. 








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                                                          Handbook No. 7460.8 REV 2
                                                          
   
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