Price Reference and Price Justification
In August 2011, the SC Higher Education Efficiency and Administrative Policies Act became law and, among other things, changed various procurement dollar thresholds. The biggest impact to purchasing was raising the fair and reasonable purchase limit (i.e. no competition required) from $2,500 to $10,000. Before this change, in 2011, a $2,501 purchase, for example, had to be processed by a certified buyer who was required to obtain three written quotes. Although 3 written quotes are no longer required for purchases $2,501-$10,000, section 11-35-1550 of the SC Code requires that the purchaser certify that the price being paid is “fair and reasonable.” The statute specifically reads:
11-35-1550 (2)(a)… may be accomplished without securing competitive quotations if the prices are considered reasonable. The purchasing office must annotate the purchase requisition: “Price is fair and reasonable” and sign. The purchases must be distributed equitably among qualified suppliers. When practical, a quotation must be solicited from other than the previous supplier before placing a repeat order.
In order to achieve the requirement of certifying purchases in the $2,500-$10K range as “fair and reasonable,” Clemson implemented a policy (https://www.clemson.edu/procurement/faculty-staff/policies/procurement/psv21proc.html) change that requires purchasers to provide written justifications of their purchases, thus, assuring Clemson maintains compliance with this law. To clarify, the policy is a result of a requirement in the law and was not implemented to shift work or create hurdles. By law, Clemson is REQUIRED to certify that the price we are paying is fair and reasonable and the policy and process set up in buyWays allows us to do this. Please use the examples and explanation below to understand how to meet this requirement.
Note: it does not say “get three written quotes” anywhere. If you have any questions or want to discuss specific examples, please contact the Procurement and Business Service team (https://www.clemson.edu/procurement/contact-us.html) and we will be happy to discuss with you or assist you in obtaining price references.
Prices obtained from preferred and alternate suppliers for requested goods and/or services that can help support the price we want to pay from the selected supplier is fair and reasonable. The prices do not need to be actual quotes, but can be pricing obtained through websites, publications, previous quotes/POs, etc…
Note, it does NOT have to be the lowest price if pricing reference shows it is in same range of other prices.
- Clemson requestor lists two other suppliers and prices offered such as:
- Supplier A - $4500
- Supplier B - $5000
- Requisition placed to Supplier C for $4400
- Simply listing suppliers names:
- Listing only other prices without stating where they come from:
- You may choose to request written quotes from three suppliers, and if so, attaching them as supporting documentation is suggested, but NOT required.
- Make sure the price references are for goods and/or services that are the same or similar.
- Do NOT waste time obtaining multiple price references if you are planning to spend more than $10K. This will most likely require bidding and obtaining other prices is a waste of time (your time and suppliers time).
There are certain instances where obtaining other prices for a good or service is not practical if it is difficult to locate other sources of supply or to get true “apple-to-apple” pricing. In these instances, providing some other justification, aside from multiple price points, to justify that a price is fair and reasonable is appropriate. Examples of what appropriate justification might be include Market Knowledge, comparison to a similar item, sales of similar item to other universities or companies, and independent university (in-house) estimate.
While we are sure other companies can provide Product A, we can only find pricing for Product B, which is the same as Product A except for one thing. Pricing for Product B is Supplier A - $3500, Supplier B - $4000.
- Stating “fair and reasonable”, “n/a”, or leaving blank.
- Stating “this is the best one in the market” or “these are the only guys that can supply it” or “this is only supplier than can provide this.” If it is truly only one supplier than can make this, then utilize a Sole Source form and justify the sole source instead of simply justifying the price.
- When looking at and researching suppliers for goods and/or services, always obtain pricing from the suppliers, even if it is preliminary pricing. If you find a good website with pricing, bookmark it.
- If you know price is going to be >$10K, do not worry about price justification as it will most likely need to be publicly bid out.