Purchasing Procedures

DE 213
Course Objectives
• To familiarize you with current
University of Texas at Austin
procedures for purchasing, the HUB
Program, and Procards

• To introduce you to POINT Plus, the

university’s online purchasing system
Definitions
• Invoice: A bill from the vendor requesting payment.

• Informal Invitation to Bid: An informal invitation to a

prospective bidder to offer a firm price quote (bid). This
may be by phone, fax, or e-mail.

• Invitation to Bid: A formal (written) invitation to a

prospective bidder to provide a firm price quote (bid).

• Quotation: A bidder’s offer to sell goods or services at a

certain price, terms of sale and description of goods, or
services offered to prospective buyer.

• Payment: The actual check issued to the vendor.

Definitions
• Purchase order: A formal agreement to buy based on an
offer to sell.

• Receiving report: A report informing appropriate parties

(Central Receiving, Accounts Payable, Expediting) of goods
received against a purchase order.

• Requisition: A written or electronic request for goods or

services received from requestor.

• Voucher: An authorization of payment for goods and

services received.
So how does this all
fit together?
Basic Purchasing Procedure
1. Create a requisition.

1. Create a
2.
3.
Obtain a bid.
Issue a purchase order.
4.
5.
requisition.
Receive material or goods and inspect.
Issue a receiving report.
6. Receive an invoice from the vendor.
7. Prepare a payment
Someone voucher.
needs something. What is
8. Sendit?
a check
How to the vendor.
many does she need?
Elements of the Requisition
• The Requestor:
Who wants the goods or service to be
ordered?
Professor Bill?
Grad Student Bob?
Dean Smith?
You?

The requestor is an important source of

info on what exactly to order.
Elements of the Requisition
• Item Description:
– What does the requestor want?

– What is it we’re going to purchase?

– What are the functional specifications?

– What is important to the requestor to

accomplish the task?
Elements of the Requisition
• Specifications:
– Specifications should include the
important functional features of the
items or services being purchased.

– Important features will vary depending

on what is being purchased and what
the requestor’s needs are.
Elements of the Requisition
– Examples of specification features:
• Size
• Color
• Speed
• Compatibility
• Weight
• Capacity
• Composition
• Volume
Elements of the Requisition
• Quantity and unit of measure:
How many and how are they
packaged?

– Package (pkg) of _____?

– Carton (ctn) of _____?
– Each?
– Box (bx) of _____?
Purchases Requiring Special Approval

• Vehicles require the approval of the Vice President for

Financial Affairs and Parking and Transportation/Fleet
Management.

• Appliances other than for laboratory use may require the

approval of the Controller’s Office (check with your buyer)
and must be on local funds.

• Radioactive materials require the approval of the Office

of Environmental Health and Safety.

• Live animals require the approval of Animal Resource

Center.
Basic Purchasing Procedure
1. Create a requisition.

2. Obtain a bid.
How much will it cost?
Determining How to Obtain Bids

First take a look at the

estimated cost…
Estimated Costs: How Much Are We
Planning to Spend?
• Can be determined from various sources such as
informal (verbal) quotes or pricing obtained from
catalogs or price lists. Previous orders may be
used to determine estimated cost.

• Determines the method for processing the

requisition.

• Should include estimate of shipping costs.

Now That You’ve Determined the
Estimated Total. . .

• What purchasing method should be used?

• How many bids or offers are required?

• Is there an established contract?

• What type of electronic document should

be used?
Purchasing Methods
• Competitive bids: Minimum of three bids, award based on
lowest bid meeting specifications.

• Best value: Minimum of three bids, allows for evaluation

of responses based on established criteria, award based on
highest scoring vendor.

• State term contracts: Contracts competitively bid by the

Texas Building & Procurement Commission (TBPC) that are
available to all state agencies. Processing now handled by
Texas Procurement and Support Services (TPASS).
Purchasing Methods
• Group or cooperative purchases: Contracts
competitively bid by various entities that are available to
eligible members.

• Blanket orders: Contracts competitively bid by UT that

are available to multiple users for an established period of
time—may be bid competitively or as best value
procurements.

• Proprietary purchases: Purchases where competition is

not available either because only one source exists, or only
one product/service is available from multiple sources.
Small Purchases (PBOs or PB3s)
• Order totals $5,000 or less

• Requires a price quote from one vendor

• Quotes are usually obtained by phone

• Use of historically underutilized businesses

(HUBs) is strongly encouraged

• Reason for award is Prime Source

Orders Totaling $5,000 - $25,000
(PB3s)
• Departments Solicit Bids

• Requires price quote from at least three bidders, two of

which must be HUB vendors (one ethnic-owned HUB, one
women-owned HUB)

• Price quotes are usually obtained by the department by

phone

• Reason for award varies, but is usually low bid

Orders Totaling over $25,000
(PB4s)
• Purchasing solicits bids

• Requires price quote from a least three

sources—normally sent to several sources,
including a minimum of two HUB vendors,
one ethnic-owned and one woman-owned

• Price quote must be obtained in writing by

the Purchasing Office
Best Value Procurement
• Allows decisions to be made based on other than
just “low bid”

• Requires an evaluation criteria be included in

specifications provided to potential bidders

• Responses are scored and the highest scorer

receives the award

• Same dollar guidelines for determining which

document type to use, same minimum number of
bidders required
State Term Contracts
• Established by competitive bids issued by the
state and administered by (TPASS)

• Cover items commonly used by many state

agencies

• Use is optional but these contracts may represent

the best value in many instances

• No bidding is required as TPASS has already

satisfied the competitive bidding requirements
State Term Contracts
• Automated, covering “off the shelf” type items
– PB7 documents are used
– Orders are electronically transmitted to TPASS for
processing

• Nonautomated, covering more custom or

specialized items
– PB8 documents are used
– Orders are processed by the university and TPASS
receives notification that an order was processed
Group/Cooperative Purchases
• Established by various organizations following competitive
bidding guidelines, including HUB requirements

• Available to the university because we are a member of an

eligible group such as state agencies or institutions of
higher education

• Cover many different items depending on the organization

• Listing available at
http://www.utexas.edu/admin/purchasing/cooppurch.html
Group/Cooperative Purchase
• Bidding not required as the contracts have already been
competitively bid, but all options should be examined to
determine which contract represents the best value for that
particular purchase

• For orders under $5000, a PBO or PB3 may be used

• For orders exceeding $5000, a PB4 must be used

• Must provide a written quote from contract vendor

Blanket Orders
• Two types
– Blanket orders for specific items at specific pricing, terms, and
conditions
– Discount agreements covering terms and conditions as well
discount amounts but no specific items

• Competitively bid by the Purchasing Office or by

other institutions of higher education that have
included a provision to allow use by other
universities. May also be processed by individual
departments for their own use.
Blanket Orders
• Cover a specific time period, are not exclusive,
generally not mandatory, and indicate that no
minimum or maximum purchase is guaranteed

• Same dollar guidelines for determining which

document type to use, same minimum number of
bidders required
Proprietary Purchases - Sole
Source or No Substitute
• Written justification is required for proprietary purchases
exceeding $5000

• Must include the following information:

– What the proprietary items’ use will be
– The unique or exclusive feature(s) of the item(s)
– Why the unique or exclusive feature(s) are required to accomplish
goals
– Why no other product or manufacturer will suffice
– What existing equipment item(s) will be used in conjunction with
– What else has been considered

Form available at
http://www.utexas.edu/admin/purchasing/docs
/word/ssnosub.doc
Just a Reminder. . .
All purchases of $25,000 or
more (excluding purchases from
existing contracts and emergencies) will
have to be issued
through the Purchasing Office
and most are posted
electronically for 14 days on
the Texas Marketplace.
When Obtaining Quotes, Don’t
Forget. . .
• Payment Terms
• Free On Board (FOB)
Payment Terms
• Net 30: Preferred by the university—indicates payment is
due within 30 days of receipt of goods or receipt of invoice,
whichever is later.

• Prompt payment terms such as 2%10, Net 30: Vendor

will allow a two percent discount if payment is received
within 10 days, otherwise full payment is due in accordance
with Net 30 terms. Discount may not be used when
comparing bids.

• Prepayment: Vendor requires prepayment prior to

shipping goods or materials.
Free on Board (FOB)
• Refers to the point at which the title to the goods
passes from seller to buyer. The title holder is
responsible for goods in transit and for filing any
freight claims.

• Determines who pays the

freight—the seller or the buyer

• Most common are destination

or shipping Point
Basic Purchasing Procedure
1. Create a requisition.

3. Issue a
2. Obtain a bid.

purchase order.
Who Issues Orders for The
University of Texas at Austin?
• The University of Texas at Austin
Purchasing Office
– All open market (nonterm contract) purchase
orders
– Nonautomated state term contract orders

• The Texas Procurement and Support

Services (TPASS) is for automated
state term contract orders.
Basic Purchasing Procedure
1. Create a requisition.

4. Receive material
2.
3.
Obtain a bid.
Issue a purchase order.
or goods and
inspect.
Central Receiving
• Central Receiving is now outsourced to MagRabbit.
There is no cost to departments for deliveries.

• This reduces the number of vehicles on campus.

• Central Receiving does not open or inspect packages; they

only deliver packages.

• All packages delivered to Central Receiving will be paid by

Accounts Payable. Anything delivered to the department
must be paid by the department.
Items That Should NOT Be Shipped
Directly to Central Receiving
• Food for human consumption
• Bulk petroleum or other products in
55-gallon drums
• Live plants or animals
• Wet or dry ice
• Bottled gas
• Plate glass, sheet rock or other fragile materials
• Unusually heavy or large items such as steel
beams
• Items for delivery to remote locations outside of
campus or outside of Austin
Basic Purchasing Procedure
1. Create a requisition.

5. Issue a receiving
2.
3.
Obtain a bid.
Issue a purchase order.
4. report.
Receive material or goods and inspect.

Verification of receipt of goods.

Basic Purchasing Procedure
1. Create a requisition.

6. Receive an invoice
2.
3.
Obtain a bid.
Issue a purchase order.
4.
5.
from the vendor.
Receive material or goods and inspect.
Issue a receiving report.
Basic Purchasing Procedure
1. Create a requisition.

7. Prepare a
2.
3.
Obtain a bid.
Issue a purchase order.
4.
5.
payment voucher.
Receive material or goods and inspect.
Issue a receiving report.
6. The vendor sends an invoice.
Basic Purchasing Procedure
1. Create a requisition.

8. Send a check to
2.
3.
Obtain a bid.
Issue a purchase order.
4.
5.
the vendor.
Receive material or goods and inspect.
Issue a receiving report.
6. The vendor sends an invoice.
7. A payment voucher is prepared.
Items Not Requiring Purchase
Orders
• Classified advertising
• Demurrage charges
• Freight
• Membership fees or dues
• Professional dues
• Registration fees and associated books and materials
• Tuition
• Utilities
• Books on local funds, only purchased from the publisher
• Cell phone and pager service
• Temporary personnel
Now on to
Procards & POINT Plus. . .
Thank you for viewing this presentation.

For more information, contact:

Trina Bickford
512-471-2860
tbickford@austin.utexas.edu
www.utexas.edu/admin/purchasing