2006 Procurement Training for State and County Purchasing Personnel Small Purchases and Hawaii Elect

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2006 Procurement Training for State and County
Purchasing PersonnelSmall Purchasesand Hawaii
Electronic Procurement System (HePS)

• HAR Chapter 3-122, Subchapter 8
• HRS Section 103D-305

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What are small purchases?

• A small purchase is an expenditure that is under
  the dollar threshold specified in section 103D-
  305, HRS, currently 50,000.
• Does not require public notice or public
  openings.
• Current administrative rules for small purchases
  are designed to ensure administrative simplicity
  and to obtain as much competition as is
  practicable.

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What can be purchased as small purchases?

• Goods, services, or construction that are not on
  an SPO Price or Vendor List.
• Professional services except design professional
  services under HRS Chapter 464 (Professional
  Engineers, Architects, Surveyors, Landscape
  Architects).
• Emergency purchases as defined in chapter
  103D-307, HRS, for immediate needs for the
  emergency only.

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What can be purchased as small purchases?

• Sole Source procurements as defined in chapter
  103D-306, HRS (4- Pre-approved)
• Exemptions as defined in chapter 103D-102, HRS,
  or section 3-120, HAR (justified on SPO 10 as an
  exemption from 103D, HRS, if not pre-approved).

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Examples of small purchases?

• The agency requires tree trimming services for
  different projects on Oahu. The agency solicits
  written quotes from vendors and does individual
  awards based on best value. Company A is awarded
  a total of 30,000, Company B is awarded 17,000,
  and Company C is awarded 9,000. (Total
  56,000). Is this an appropriate small purchase?

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Examples of small purchases?

• An agency requires 12-months refuse services on
  Oahu, Maui, and Kauai. The purchasing manager on
  Oahu instructs each island district office to
  obtain a minimum of 3 written quotes and to
  submit the quotes back to his/her office for
  evaluation and award. The resulting awards for
  each island totals 20k and the purchasing
  manager issues POs to 3 vendors (total 60K).
  Is this an appropriate small purchase?

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Examples of small purchases?

• An agency requires various irrigation equipment
  and supplies on Maui. The purchasing manager
  issues three open purchase orders not to exceed
  20k each to City Mill, Maui Irrigation Supply,
  and Kahului Sprinklers for a 12-month period. At
  the end of the 11-month period, the combined
  totals for each open purchase order is 49k. The
  purchasing manager stops purchases until new open
  purchase orders are done after the 12-month
  period. Is this an appropriate small purchase?

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Examples of small purchases?

• An agency requires janitorial services for a
  building. The agency solicits quotations for a
  12-month period with options to extend for 2
  additional 12-month periods, or parts thereof.
  The selected vendor offers a cost of 18,000 per
  year (Total 54,000). Can the agency enter into
  this agreement as a small purchase?
• What if the cost per year was 15,000 (total
  45,000)?

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Examples of small purchases?

• An agency requires tree trimming at various
  properties on Oahu. They obtain 3 written quotes
  since they estimate the amount to be 45K. Award
  is to the best value at 48K and a purchase order
  is issued. During the work, the agency realizes
  they forgot 3 trees that needs to be trimmed.
  The contractor is willing to do the work at a
  cheap rate since they are onsite. The agency
  agrees and issues another PO for 3,000. (Total
  51,000) Are these appropriate small purchases?

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Examples of small purchases?

• An agency requires waterline replacement at a
  pier. They obtain 3 written quotes since they
  estimate the amount to be 40K. Award is to the
  best value at 42K and a purchase order is
  issued. During the excavation work, the
  contractor discovers unforseen deterioration of
  another section of pipe that needs to be
  replaced. The contractor is willing to do the
  work for 10K since they are onsite. The agency
  agrees and issues another PO for 10K. (Total
  52K) Are these appropriate small purchases?

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What is considered adequate competition for small
purchases?

• Small purchases require adequate and reasonable
  competition. The number of quotations should be
  based on the number of vendors or sources
  available to supply the goods/services and value
  or price of the item(s).
• Procurement Circulars and Directives provide
  guidance for obtaining quotations based on dollar
  amounts.

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Awarding of Small Purchases

• Must be based on specifications, criteria, and
  adequate and reasonable competition, if required
  by rules.
• Award is made to vendor providing the best value
  to the State.
• If award is not to the lowest price, an
  explanation must be provided on SPO Form 10.

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What kind of documentation is used for small
purchases?

• SPO Form 10 (3 quotes min.) is required when the
  amount of the small purchase is between 2,500
  and 14,999.
• SPO Form 10 10A (3 written quotes min.) is
  required when the amount of the small purchase is
  between 15,000 and 24,999.
• SPO Form 10 and the electronic abstract of offers
  received is required when the amount of the small
  purchase is between 25,000 and 49,999.

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Public Information of Small Purchases

• After the small purchase is completed (purchase
  order is issued or upon pCard order), all
  documents relating to the small purchase are
  considered public record and should be released
  to anyone requesting such information in
  accordance with chapter 92F, HRS.
• If the purchase is between 15k to 24,999, it
  must be reported in the Procurement Reporting
  System (PRS) at

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http//www.hawaii.gov/spo2/manage/login.php
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Public Information of Small Purchases

• If the small purchase is for professional
  services pursuant to section 103D-304, HRS, and
  at least 5,000, it must be reported in the
  Professional Services Awards website at

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http//hahalua.icsd.hawaii.gov/act141psa/
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What is Parceling?

• Small purchases shall not be artificially divided
  or done as multiple expenditures at the inception
  of a transaction or project to evade statutory
  competitive requirements.
• Same, like or related items procured as small
  purchases during a 12-month period that exceed
  50,000 may be considered parceling.

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Procurement Violations

• HOPA is responsible for agencies compliance with
  the law. Violations are normally inadvertent,
  and result of administrative error, lack of
  knowledge, or simple carelessness.
• In reviewing a procurement violation, it is
  important to pinpoint the weaknesses in the
  procurement code and find ways to improve the
  code, and also to determine if action was civil
  or criminal.
• Agencies must report to and obtain the approval
  of the Chief Procurement Officer/Chief Financial
  Officer on SPO Form 16.

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• Civil Penalties
• A person who contracts for or purchases, goods,
  services, or construction, in a manner the person
  knows to be contrary to the requirements of the
  procurement law is liable for all costs and
  damages to the State arising out of the
  violation.
• A person must have knowingly violated the
  requirements of the law. In other words, the
  person committing the violation must be aware
  that he or she is acting contrary to the
  requirements of the law at the time the violation
  occurs.

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• Civil Penalties
• Violations that are the result of administrative
  error, or mistake, ignorance, or carelessness are
  usually not subject to criminal penalties. The
  determining factor is what the person understood
  the procurement requirements to be when the
  violation occurred, and whether or not the person
  believed he or she was acting in compliance with
  those requirements.

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• Criminal Penalties
• A person who intentionally or knowingly
  contracts for or purchases goods, services, or
  construction, under a scheme or trickery to avoid
  the requirements of the procurement law shall be
  guilty of a misdemeanor, in addition to any
  applicable criminal penalties, shall be subject
  to removal from office and shall be liable to the
  State or the appropriate County for any sum paid
  by it in connection with the violation, and that
  sum, together with interest and costs, shall be
  recoverable by the State or County.

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• Criminal Penalties
• A person must have knowingly or intentionally
  engaged in a scheme or artifice to avoid the
  requirements of the law. The violation must have
  been committed in a deliberate manner, involving
  some calculated means, such as parceling or a
  single procurement, a deliberate misstatement of
  fact, or an after-the-fact purchase, which is
  purposefully designed to avoid the requirements
  of the law. Legally admissible documentary
  evidence of the wrongdoing must be available to
  law enforcement authorities in order for criminal
  prosecution to be undertaken.

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• Criminal Penalties
• Law enforcement authorities will also need to
  determine whether personal gain was intended or
  involved for either the person committing the
  violation, a friend or relative of the person, or
  vendor, or whether some other vendor was
  significantly injured, or whether intended or
  not.

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Examples of Small Purchases that Result in
Procurement Violations

• Combined 12-month purchases of plumbing
  repairs/replacement parts from several plumbing
  stores that exceed 50,000 or more.
• Combined 12-month purchases of small
  tools/supplies from hardware stores that exceed
  50,000 or more.
• Annual service contract (i.e., janitorial) with
  options to extend for additional 1 year term that
  total 50,000 or more.

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Examples of Small Purchases that Could Result in
Procurement Violations

• Doing small purchases prior to executing a
  contract if combined total exceeds 50,000 or
  more.
• Doing small purchases to continue receiving
  services immediately after termination of a
  contract (i.e., contract not re-solicited,
  contract not extended prior to termination,
  etc.).

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Examples of Small Purchases that Could Result in
Procurement Violations

• Small purchases by different sections or branches
  of a Division with oversight by a single office
  or individual (Fiscal Officer)

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Examples of Remedies to Prevent Procurement
Violations

• Executing requirements types of contracts in
  situations where exact number of items unknown
  for 12-month period.
• Executing requirements types of contracts for
  items based on prior purchasing history (list
  descriptions of various items with no commitment
  to purchase any listed item).

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Examples of Remedies to Prevent Procurement
Violations

• Reviewing history of regular maintenance items or
  projects to see if a contract would be more
  advantageous than purchase orders for 12-month
  period.

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Contract Forms

• Agencies shall use the AGs Standard Contract
  Forms, AG-002, titled, Contract for Goods and
  Services Exempt, Small Purchase, Sole Source, or
  Emergency, that can be found at
• http//www4.hawaii.gov/StateForms/Internal/ShowInt
  ernal.cfm

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SPO Assistance

• Colin Tanaka [phone]
• colin.y.tanaka_at_hawaii.gov
• Vicki Kitajima [phone]
• vicki.a.kitajima_at_hawaii.gov
• Justin Fo [phone]
• justin.fo_at_hawaii.gov