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Introduction to Purchasing at UC Merced Presented by: Karen Meade, C.P.M. Principal Buyer.

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Presentation on theme: "Introduction to Purchasing at UC Merced Presented by: Karen Meade, C.P.M. Principal Buyer."— Presentation transcript:

1 Introduction to Purchasing at UC Merced Presented by: Karen Meade, C.P.M. Principal Buyer

2 Objectives 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 Public contract law and UC policies and how they relate to our purchasing activities at UC Merced Purchasing fundamentals Purchasing fundamentals Campus Purchasing procedures Campus Purchasing procedures Ethical considerations related to Purchasing Ethical considerations related to Purchasing

3 Overview Purchasing Laws and Policies Purchasing Laws and Policies Contract Formation Contract Formation Battle of the Forms Battle of the Forms Purchasing Terms and Considerations Purchasing Terms and Considerations Systems and Services Systems and Services Procurement Methods Procurement Methods Purchasing Procedures and Process Purchasing Procedures and Process Documentation Documentation Ethics Ethics

4 Laws, Policies and Regulations that Govern Purchasing Sherman Antitrust Act (1890) Sherman Antitrust Act (1890)  First U.S. legislation enacted to curb concentrations of power that restrict trade and reduce economic competition Clayton Antitrust Act (1914) Clayton Antitrust Act (1914)  Supplement to Sherman Antitrust Act  Established Federal Trade Commission (FTC) Robinson-Patman Act (1936) Robinson-Patman Act (1936)

5 Laws, Policies and Regulations that Govern Purchasing (con’t.) Uniform Commercial Code (UCC) 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.) 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.

6 Laws, Policies and Regulations that Govern Purchasing California Political Reform Act (1974) California Political Reform Act (1974)  Disqualification of participation if financial Conflict of Interests are present State of California Public Contract Code 100-10 (1981) State of California Public Contract Code 100-10 (1981)  Objectives  Protect the public from misuse of public funds  Provide qualified bidders with a fair opportunity, stimulate competition  Prevent favoritism, fraud, and corruption

7 Laws, Policies and Regulations that Govern Purchasing (cont’d.) Bylaws and Standing Orders of the Regents of the University of California Bylaws and Standing Orders of the Regents of the University of California Regental Policies Regental Policies Administrative policies issued by the President of the University 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 Policies and requirements of the funding agencies for Federal contracts and grants, and other extramural agreements

8 Recent Legislation SB 1467 & SB 41 – Conflict of Interest SB 1467 & SB 41 – Conflict of Interest  Employees as independent contractors  Former employees and contracting limitations  Follow-on contracts SB 1386 – Privacy SB 1386 – Privacy------------------------------------------------------------------------------------------- Employee-Vendor Relationship Employee-Vendor Relationship  Financial Interest >10%  Conflict of Interest Form

9 Law of Agency Body of law that governs agents Body of law that governs agents  Authority to Contract

10 Law of Agency Agent - an individual who is authorized to act for someone else in business dealings with a third party. For purchase transactions, who are agents for the University? For purchase transactions, who are agents for the University?  Purchasing Directors  Buyers  All individuals that are authorized / delegated authority to place orders for the University (Authority is not delegated to departments!)

11 Law of Agency Authority Authority  Express (actual authority)  Written (UC Merced delegation)  Oral  Implied (customary/apparent)  Usual course of Business - customary Prior practice of individuals - apparentPrior practice of individuals - apparent Purchasing’s obligation regarding Unauthorized (After-The-Fact) purchases

12 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. 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?

13 Example of Authority, cont. Yes. 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 CONTRACT.

14 Formation of a Contract - Five Elements 1. Offer and Acceptance 2. Intent 3. Competent Parties 4. Legality of Purpose 5. Consideration

15 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. 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.

16 Offer A promise or commitment to do or not to do a specified thing in the future. 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. Advertisements, circulars, price sheets or generally not offers- they are an invitation to negotiate. Can be made by a buyer or seller. Can be made by a buyer or seller. Purchase Order, Bid, Quotation (depends on terms), Letter of Intent Purchase Order, Bid, Quotation (depends on terms), Letter of Intent

17 Offer, cont. May lapse May lapse May be rejected May be rejected May be rejected by a counter-offer May be rejected by a counter-offer May be revoked May be revoked May be accepted May be accepted

18 Acceptance 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., Acknowledgemente.g., Acknowledgement Mailed acceptance becomes effective upon mailing.

19 Intent Parties must consent and intend to contract voluntarily. Parties must consent and intend to contract voluntarily.

20 Consideration Consideration embodies a mutuality of obligation, and can also be a forbearance (agreement NOT to do something). 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

21 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) 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 Misrepresentation or fraud Insanity Insanity Minor status Minor status

22 Legality of Purpose Contracts for illegal purposes are not enforceable. Contracts for illegal purposes are not enforceable.

23 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?

24 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.”

25 Contract Formation Implied-In-Fact Contract 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.

26 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. 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.

27 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. 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.

28 Contract Formation Remember—The value of a Purchase Order is not just the cost of the item, but the risks involved. Remember—The value of a Purchase Order is not just the cost of the item, but the risks involved.  Terms and conditions?  Example: A phone order of $200 for photography services. Are there any risks?

29 Contract Formation “Get it in writing, put it in writing, and make the writing as complete, clear and comprehensive as possible” “Get it in writing, put it in writing, and make the writing as complete, clear and comprehensive as possible”

30 Battle of the Forms Parties will use "boilerplate" language to govern the terms of a sale. 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 terms. The buyer, for example, will send a purchase order with a set of boilerplate terms. The seller usually responds with an acknowledgment and invoice with another set of boilerplate terms. The seller usually responds with an acknowledgment and invoice with another set of boilerplate terms.

31 Battle of the Forms, Whose Terms and conditions Govern? Conflicting terms always cancel out one another. Conflicting terms always cancel out one another. 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. 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.

32 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. 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 a contract? Do you have any warranties? Do you have any warranties?

33 Battle of the Forms Yes, there is a contract. “No warranties” becomes a contract term..

34 Other Purchasing/Contract Terms and Considerations

35 Most orders are taxable Most orders are taxable (Even if supplier doesn’t charge tax)  Tangible goods/services  Out-of- State purchases Non-taxable orders Non-taxable orders  Resale orders  Non-taxable services  Non-tangible software  Federal Government has title Taxable/non-taxable

36 Buying for UC Merced

37 Procurement System/Services PAC/CatBuy PAC/CatBuy  UC Merced Online Purchasing System  Hosted by UCLA  Customized for UC Merced UC Merced Purchasing Team 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 UC Merced Accounts Payable Team

38 Your Accounts Payable Team Located at UCLA Accounting Department Located at UCLA Accounting Department UC Merced Dedicated Team UC Merced Dedicated Team  Jennifer Chhoeung, Team Leader Processes all UC Merced Invoices and Payments Processes all UC Merced Invoices and Payments

39 Team Objectives Satisfy End-User Requirements Satisfy End-User Requirements Achieve Maximum Value Achieve Maximum Value Minimize University Risk and Liability Minimize University Risk and Liability Ensure Compliance with Federal & State Laws and UC Policies Ensure Compliance with Federal & State Laws and UC Policies Further UC Merced Programmatic Goals Further UC Merced Programmatic Goals  Environmental Sustainability  Economic Development of Local Region

40 Procurement Methods Departmental Orders 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 Petty Cash Recharge (through other department or campus) Recharge (through other department or campus) Purchase Requisition Purchase Requisition  Regular “R” requisition = “P” class PO issued by Purchasing  Blanket “J” requisition = “B” class PO issued by Purchasing

41 Low Value Orders Low Value Orders (LVOs) 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 commitment.

42 Restricted Items – LVO (partial list – see LVO policy) Agreements/Contracts that require signatures Agreements/Contracts that require signatures Furniture Furniture Alcohol Alcohol Guns Guns Controlled Substances, Radioactive substances Controlled Substances, Radioactive substances Explosives Explosives Alcohol (ethyl alcohol) Alcohol (ethyl alcohol) Independent Contractor Services (other than one-time repair), Consultants, Professional Services, etc. Independent Contractor Services (other than one-time repair), Consultants, Professional Services, etc. Communications (phone system, etc) Communications (phone system, etc) Items from employee or near relative Items from employee or near relative Firearms, explosives, and ammunition Firearms, explosives, and ammunition Installation requiring contractor’s license Installation requiring contractor’s license Lasers, X-ray and safety equipment Lasers, X-ray and safety equipment Lease purchases Lease purchases

43 Purchase Requisitions Purchase Requisition 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.

44 Requisition/Order Specifications Defines statement of needs – End User Defines statement of needs – End User Describes what buyer buys and what supplier provides. Describes what buyer buys and what supplier provides. Will be the basis for the contract. Will be the basis for the contract. Types: Types:  Functional - defines task or desired result  Technical - physical characteristics  Performance - capability, performance characteristics

45 Specifications, cont. Specifications for Goods Specifications for Goods  Detailed description of goods  Model number or equal*  Installation  Training  Services  Date needed * Sole source?

46 Specifications, cont. Specifications for Services 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 delivery) delivery)

47 Purchase Orders (common types) Regular Purchase Order (Class “P”) (w/encumbrance) Regular Purchase Order (Class “P”) (w/encumbrance)  One-time purchase Blanket Orders (Class “B”) (w/o encumbrance) 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

48 Procurement Methods - Purchasing Requirements < $100,000 (effective 01/01/11) Requirements < $100,000 (effective 01/01/11)  Informal Bids  Negotiations Requirements > $100,000 (effective 01/01/11) Requirements > $100,000 (effective 01/01/11)  Formal Bid Process  RFI (Request for Information)  RFQ (Request for Quotation)  RFP (Request for Proposal)  Negotiations

49 Competitive Bidding Requirements UC policy requires formal competitive bidding for all requirements $100,000 and over unless… 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 bidder Award to lowest responsive, responsible bidder

50 Responsive 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 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.

51 Responsible 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.).

52 Basis of Award  Lowest cost (used for RFQs, RFBs)  Lowest cost-per-quality point (used for RFPs) (used for RFPs)

53 Sole Source Justification UC /UC Merced requires sole source justification, in writing signed by end-user/end-user department. 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 need/application.  Avoid justifications based on quality & price - formal bidding provides that determination.  Match-existing requirements must be valid/reasonable.  Requires Purchasing approval.

54 What Can You Negotiate? Price Price  Education/Academic discounts  GSA discounts or CMAS discounts  Volume discounts  Price Protection Favorable Terms and Conditions Favorable Terms and Conditions  FOB  Payment  Guarantee  Warranty Services Services Used or refurbished Used or refurbished Training Training

55 Product substitution  Alternate brands  Demo/refurbished equipment Donations Donations Annual contracts Annual contracts Year-end/Sales quarter-end purchases Year-end/Sales quarter-end purchases Standardization Standardization Other Cost-saving Techniques

56 Always Remember…. Win - Win

57 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 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. 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.

58 Unauthorized Purchase/A.T.F., cont… An individual may be personally responsible for payment of charges incurred by an unauthorized purchase. An individual may be personally responsible for payment of charges incurred by an unauthorized purchase. Time constraints do not constitute a reason for an unauthorized purchase Time constraints do not constitute a reason for an unauthorized purchase  If there is an emergency, call Purchasing!! Partnership = Department + Purchasing (working together) Partnership = Department + Purchasing (working together)

59 Order Documentation/Justification Vendor Selection (Basis of Award) Vendor Selection (Basis of Award) Price Reasonableness Price Reasonableness

60 Sourcing methods/tools Business Information Form Business Information Form  Pre-qualification  Substitute W-9 form Strategic Sourcing suppliers Strategic Sourcing suppliers Small & local businesses Small & local businesses Disabled veteran business enterprises (DVBE) Disabled veteran business enterprises (DVBE) Conflict of Interest issues Conflict of Interest issues Vendor Qualification/Selection

61 Vendor Selection Vendor Selection Vendor Selection  Multiple Quotes  Sole Source  Match existing  Only known source  Emergency Purchase  Agreement Source  Best Source

62 Price Reasonableness A reasonable price A reasonable price is one that does not exceed that which would be incurred by a prudent person in the conduct of a competitive business.

63 Price Reasonableness Multiple Quotes/Bids Multiple Quotes/Bids Price previously paid Price previously paid Vendor certifies lowest price Vendor certifies lowest price Market knowledge/Professional judgment Market knowledge/Professional judgment Educational/GSA/CMAS pricing Educational/GSA/CMAS pricing Standard commercial price – no discounts Standard commercial price – no discounts Vendor certifies lowest price Vendor certifies lowest price Cost/price analysis Cost/price analysis UC Agreement UC Agreement

64 Order Documentation Justification for Vendor Selection and Price Reasonableness Justification for Vendor Selection and Price Reasonableness All University orders are subject to audit. All University orders are subject to audit. Order backup should be kept on file for a period of 5 years after order is placed. 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 purchasing.ucmerced.edu.

65 Process Timeline - Purchasing Negotiation and Informal Bids Negotiation and Informal Bids  In general, one to two weeks to order placement, but depends on complexity Formal Bids Formal Bids  Six to twelve weeks to contract award  Early involvement is key Emergency Requirements Emergency Requirements  Immediate turnaround

66 Completing the Process Contract Award/Purchase Order Posted Contract Award/Purchase Order Posted Order Documentation Order Documentation Goods Delivered to Central Receiving Department Goods Delivered to Central Receiving Department Central Receiving Delivers Goods to Department Central Receiving Delivers Goods to Department Payment is Processed by Accounts Payable Payment is Processed by Accounts Payable

67 Ethics Avoid even the appearance of anything less than complete integrity, objectivity, and impartiality.

68 Ethics (cont’d.) ACID Test Would you like to read about it -- your decision or action -- on the Merced Sun Star’s front page? Would you like to read about it -- your decision or action -- on the Merced Sun Star’s front page?

69 Ethics (cont’d.) Supplier Supplier  Treat all suppliers fairly in all matters.  Conduct complete and open bidding process.  Don’t divulge competitor pricing until after award.  Protect proprietary/confidential information.  Do not knowingly take advantage of a Supplier error.

70 Ethics (cont’d.) Anyone that buys for the University must perform their roles in a manner that protects the University. Anyone that buys for the University must perform their roles in a manner that protects the University. Reputation and fairness are key characteristics that must be established in the buying process. Reputation and fairness are key characteristics that must be established in the buying process.

71 Please... DO NOT provide requisition numbers to suppliers. DO NOT provide requisition numbers to suppliers. DO NOT sign supplier paperwork/agreements. DO NOT sign supplier paperwork/agreements. DO NOT commit to a supplier unless you will be awarding the contract. DO NOT commit to a supplier unless you will be awarding the contract. DO NOT provide suppliers with budget information. DO NOT provide suppliers with budget information. DO NOT communicate with suppliers during a bid process. DO NOT communicate with suppliers during a bid process.

72 Please … DO contact Purchasing with questions, issues or suggestions. DO contact Purchasing with questions, issues or suggestions. DO provide input regarding supplier and contract performance. DO provide input regarding supplier and contract performance. DO share your success stories. DO share your success stories. DO let us know how we can better assist you and your department. DO let us know how we can better assist you and your department.

73 Purchasing is your Resource for… Locating Sources of Supply Locating Sources of Supply Suggesting Alternatives Suggesting Alternatives Discussing Policies and Procedures Discussing Policies and Procedures Providing Pricing and Product Information Providing Pricing and Product Information Discussing Legal Considerations Discussing Legal Considerations Creating Formal Bid Documents Creating Formal Bid Documents Purchasing, Can I help you?

74 Purchasing is your Resource for… (cont’d.) Assistance in Specification Development Assistance in Specification Development Supplier Pre-Qualification Supplier Pre-Qualification Accessing Insurance Requirements Accessing Insurance Requirements Determination of Best Procurement Method Determination of Best Procurement Method Contract Negotiations Contract Negotiations Assistance in Sole Source Documentation Assistance in Sole Source Documentation Facilitating Emergency Requirements Facilitating Emergency Requirements Problem Resolution Problem Resolution

75 Other Activities Strategic Sourcing Initiatives Local Campus Contracts Sustainability Efforts Expanded Training Offerings Streamlined Procurement Supplier Outreach

76 Path Forward - Together We strive to provide excellent service to you, our campus effectively working together, we are able to maximize University value and minimize University risk in the procurement of your campus requirements. 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 requirements.

77 Future Focus… Simplify and Streamline Processes Increase Number of Strategic Contracts Enhance Communication Identify and Address Additional Training Needs Continue to Maximize Value, Minimize University Risk and Support Campus Programmatic Requirements

78 Questions ?

79 Purchasing Website An Invaluable Resource! purchasing.ucmerced.edu

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88 Questions ?

89 Thank you!


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