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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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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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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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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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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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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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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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