Third Party Procurement
Frequently Asked Questions
Q = Question; A = Answer
Q. Under the Micropurchase guidelines, the Best Practices Procurement Manual talks about not "Bid Splitting" to avoid having to use another method of procurement. This makes sense if I'm buying 5 buses and split the procurement into 5 separate purchases; but it is not as clear on other items. For instance, does this mean that I need to watch how much we spend with a certain vendor on just oil filters, or how much we spend with a certain vendor on auto parts generally? Likewise, for office supplies, should I just look at big items like paper, or should I look at general office supplies purchased from one vendor? For example, we purchased $4,000 worth of various office supplies from one particular vendor last year, each one was considered a Micro Purchase. This year, if we expect to spend a similar amount, should we consider the whole $4,000 as one non-Micropurchase (and therefore use a Purchase Order, etc.)?
A. There is no specific formula for determining when bid splitting is occurring. An agency may have a valid reason for only buying one or several months' requirements at a particular time. Perhaps there is an expected change in the product line and the agency does not want to commit to purchasing any more product than necessary before the new versions become available. Or perhaps there are limitations on the available inventory space at the agency's facility.
The important thing to consider is your agency’s buying pattern for a particular item. In other words, one would have to review the buying history and make a judgment that the pattern of buying indicates contracts are being awarded at frequent intervals for amounts that are under the thresholds for micro-purchases or small purchases, and that there is no other sound reason for the buying pattern.
The key focus regarding bid splitting is the reasoning behind the agency’s buying patterns. The procurement file should explain that reasoning in such a way that it makes sense to an independent third party. Multiple small orders would be considered "splitting," then, when the agency has no good business or program reason to continue to buy an item repetitively, at frequent intervals, instead of consolidating its requirements and soliciting bids for such a length of time and for such quantities as to maximize price competition.
The issue of splitting would not normally arise in a reviewer's mind when agencies award contracts for customary periods such as one to two years. Also, the contract files should reflect how the contract period of performance was determined in order to avoid any judgment by a reviewer that bid splitting was occurring. Why would an agency buy only two months worth of its needs at any given time when it could be soliciting bids for one or two years' requirements and presumably getting much better prices?
One thing an agency might do to avoid any criticism of its buying patterns is to periodically review its repetitive purchases to determine if consolidation and larger procurements would be warranted. The results of the agency's review could be documented to reflect its findings as to the items reviewed. This documentation would then be available should anyone later question the buying patterns. (Revised: September 4, 2009)