ADMINISTRATIVE PROCEDURE

Establishing a Basis for Supplier Selection and Price, and Assuring a Reasonable Price

Purchases of Professional Services under $50,000

For purchases of professional services under $50,000, University departments must justify their selection of a professional service supplier by documenting:

  1. the basis for selecting the supplier;
  2. the basis for the supplier's price; and
  3. how the department knows that the price is reasonable.

When preparing an electronic requisition, enter this information in the PSIS Form (Professional Services Information Sheet) and attach the completed form to the requisition. Departments may request Purchasing conduct a Request for Proposal (RFP) process. An RFP process provides all of this information.

Purchases of Professional Services $50,000 and Over

Requisitions for purchases of professional services $50,000 and over are routed automatically to Purchasing Services. A Purchasing Services category manager will conduct a competitive Request for Proposal (RFP) process (see Request for Proposal (RFP) Overview). The RFP process will identify a supplier and provide justification for supplier selection, a basis for the price, and assurances of reasonable price.

Basis for Contractor Selection

In the absence of a competitive process for identifying the supplier, the requisition must include a written justification as to why the supplier was selected. State what uniquely qualifies the selected supplier to perform the work.

Basis for Contractor's Price

Ask the supplier to provide justification for the price. Examples include a breakdown of the project with the cost of each phase or task; a formula where an executive search firm charges 1/3 of the candidate's starting salary; etc.

Reasonable Price Analysis

Without a competitive process, the requisition must include some other assurance that the price is reasonable. This documentation must include one or more of the following demonstrating assurance of reasonable pricing:

  • Cost comparison of similar purchases from other suppliers.
  • Cost comparison to peer institution's purchase for comparable project.
  • Cost / price breakdown of all charges with supplier's markup itemized.
  • Qualified individual's knowledge of the service market.
  • Published prices with any discounts that apply.
Example:
Basis for Contractor Selection:
Dr. Smith is a retired, published butterfly expert (see attached resume). Dr. Smith has agreed to oversee a 12-week project for the University's Entomology Department to research and report on the effects of methodological limitations in the study of butterfly behavior and demography. Dr. Smith will submit a detailed report at the end of the 12-week project. The cost for this project will be $55,000. No other candidates with Dr. Smith's degree of specialization are known by the U of M Department of Entomology and inquiries at other Universities' entomology departments turned up no candidates either.
Basis for Price:
Since Dr. Smith will be spending 1/4 of the year on this project, Dr. Smith's fee was calculated as 1/4 of his previous annual salary at the University of Utah.
Assurances of Reasonable Price:
Since Dr. Smith's fee is based on his previous annual salary rate at the University of Utah, the fee for this work is considered reasonable.

Assistance Is Available

If you need advice or assistance preparing an RFP for requests $50,000 and over, evaluating proposals, or advice on preparing a Basis for Contractor Selection, Basis for Price, or Assurance of Reasonable Price, contact Purchasing Services at 612-624-2828.

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