**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
> 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.
>
> 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.

**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.
>
> 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]{.underline}**. 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]{.underline}**. 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]{.underline} 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.

**TABLE 5.1 MANDATORY CONTRACT CLAUSES FOR SMALL PURCHASES OTHER THAN
CONSTRUCTION**

**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.