Establishing a Basis for Contractor 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 provider by documenting

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

When preparing an electronic requisition, enter this information in the comments field for the first line item of the requisition. Departments may request that Purchasing conduct a Request for Proposal (RFP) process. An RFP process provides all of this information.

Purchases of Professional Services $50,000 and Over

Requistions for purchases of professional services $50,000 and over are routed automatically to Purchasing Services. A competitive Request for Proposal (RFP) process will be conducted by a Purchasing Services buyer. The RFP process will identify a contractor and provide justification for contractor selection, a basis for the price, and assurances of reasonable price.

Basis for Contractor Selection

If you will not be using an RFP process as a basis for selecting your contractor, you must submit written justification as to why you selected the Contractor. State what uniquely qualifies the contractor you have identified to perform the work.

Basis For Contractor’s Price

Ask the vendor to provide justification for the price; for example, a breakdown of the project with the cost of each phase or task, or perhaps a formula, for example, an executive search firm that charges 1/3 of the candidate's starting salary.

Reasonable Price Analysis

If you will not be using an RFP process to assure a reasonable price, you must be able to provide some other assurance that the price is reasonable. You may cite one or more of the following and explain how it assures you that the price is reasonable:

• Cost comparison to similar purchases from other vendors.
• Cost comparison to peer institution's purchase for comparable project.
• Cost / Price breakdown of all charges with vendor'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 his report at the end of this 13-week project. The cost for this project will be $25,000. 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, evaluating proposals, or advice on preparing a Basis for Contractor Selection, Basis for Price, Assurance of Reasonable Price, contact Purchasing Services, 612-624-2828.