(e) Procedures. (1) Negotiation of basic agreements may be undertaken by operating agencies of DHEW in behalf of the Department. When an operating agency decides to negotiate a basic agreement with an organization, prior authorization must be requested, in writing, from the Director, Division of Procurement Policy and Regulations Development (DPPRD), OGPM. When the Director, DPPRD, gives written authorization to the agency designated to conduct negotiations on behalf of the Department, all other agencies will be notified of this designation. If another agency elects, it may attend the negotiation or furnish special terms and conditions or provisions for inclusion in the proposed basic agreement by advising the designated negotiating agency in writing within ten (10) days from the date of the authorization. After review and resolution of all requests for inclusion of special terms and conditions or provisions, the designated negotiating agency will invite those operating agencies who expressed an interest in attending the negotiations and make the necessary arrangements for the negotiation of the basic agreement.

(2) Prior to the conclusion of negotiations, the designated negotiating agency shall furnish the other operating agencies a draft copy of the proposed basic agreement, together with:

(i) A resume of all salient features of the basic agreement which will facilitate review;

(ii) Any of the operating agency's guides or procedures which are being considered for incorporation into the basic agreement by reference;

(iii) A listing of nonstandard clauses used, the genesis of such clauses, and the reasons for such clauses in the basic agreement; and

(iv) The contractor's comments, including the basis for his requesting any deviation from the DHEW Procurement Regulations and the designated negotiating agency's position with respect thereto.

(3) The other operating agencies shall have fifteen (15) days from the date of the memorandum transmitting the aforesaid information to submit

comments on the draft copy of the basic agreement. After receipt, analysis and resolution of the comments of the other operating agencies, the designated negotiating agency will proceed to conclude the negotiation of the basic agreement.

(4) After conclusion of the negotiation but prior to execution of the basic agreement, a copy of the basic agreement, together with the information specified in paragraph (e)(2) of this section, and the comments of the other operating agencies with the designated negotiating agency's analysis thereof and the basis for the action taken will be furnished to the Director, DPPRD, OGPM, for review by DPPRD, and the Office of General Counsel. Approval by the Deputy Assistant Secretary for Grants and Procurement Management or his designee must be given prior to the execution of the basic agreement. After approval and execution of the basic agreement, the designated negotiating agency will distribute the executed document to the other operating agencies, Office of General Counsel, and the Office of Grants and Procurement Management, OASAM. The basic agreement is mandatory for use by all agencies of the Department for all procurements falling within the scope of the basic agreement.

(f) Listing of basic agreements. Appendix A to this chapter lists all of the approved basic agreements. The appendix will be updated on a quarterly basis.

[39 FR 43545, Dec. 16, 1974]

be originated by Government personnel.

(b) Policy. (1) The practice of issuing letters of intent is not authorized by the Federal Procurement Regulations and is therefore prohibited. HEW personnel shall not issue such letters for the following reasons:

(i) While such letters of intent may disclaim Government liability, they may induce potential contractors to initiate costly preparations in anticipation of contract award.

(ii) Procurements announced in such letters do not always materialize. The result may be costly to the Government, the prospective contractor, or both. If the author of the letter of intent is an authorized contracting agent of the Department, the Government may be bound by his action, even though the action is contrary to sound procurement practices and/or fiscal regulations. If the author of the letter of intent lacks procurement authority, the prospective contractor may incur substantial expenditures for which he may not recover from the Government, but for which he may seek to hold the unauthorized author personally liable. (See Subparts 1-1.4, of this Title and 3-1.4 of this chapter.)

(iii) The issuance of a letter of intent may violate the "Anti-Deficiency Act" (31 U.S.C. 665).

(2) It is recognized that potential contractors have a need to obtain procurement information at the earliest possible moment in order to make timely preparations. To this end, procurement personnel are expected to move as efficiently and expeditiously as possible on all procurement actions. It is not permissible, however, to issue letters of intent to circumvent the requirements of FPR and HEWPR.

§ 3-3.450-2 Memorandums of understanding.

(a) Description. A "memorandum of understanding" is an unauthorized agreement, usually drafted during the course of negotiations, to modify mandatory FPR and HEWPR provisions in such a manner as to make them more acceptable to a prospective contractor. Such memorandums may bind the contracting officer and his successors not to exercise rights given the Government under the contract, or may contain other matters directly contrary to the language of the solicitation or prospective contractual document.

(b) Policy. Use of memorandums of understanding described in paragraph (a) of this section, is not authorized. Any change in a solicitation or contract shall be made by amendment or modification to that document. When a change to a prescribed contract clause is considered necessary, a deviation shall be requested in accordance with § 3-16.5003 of this chapter. [38 FR 1393, Jan. 12, 1973]

Subpart 3-3.6—Small Purchases

SOURCE: 35 FR 18115, Nov. 26, 1970, unless otherwise noted.

§ 3-3.600 Scope of subpart.

This subpart prescribes the policies and procedures for purchases of supplies and nonpersonal services when the aggregate dollar amount in any one transaction does not exceed $10,000. Purchases not in excess of $10,000 which are accomplished in accordance with the policies and procedures of this subpart 3-3.6 shall be termed "small purchases." Small purchase methods included in this subpart include solicitations made either orally, or in writing using a SF-18, and award via Standard Form 147 (Order for Supplies or Services); Standard Form 44 (Purchase Order-InvoiceVoucher); Blanket Purchase Agreements (BPA), or Imprest Funds. Procurements not in excess of $10,000 which are accomplished by more formal negotiation methods other than those prescribed in this subpart

and which are negotiated pursuant to 41 U.S.C. 252(c)(3), are also defined as small purchases. In arriving at the "aggregate dollar amount" involved, all supplies and services must be included which would be properly grouped together in a single advertisement for bids if the procurement were being effected by formal advertising. The amount of $10,000 includes the total price of the order including all estimated handling and freight charges to be paid to the prospective contractor. Requirements aggregating more than $10,000 shall not be broken down into several purchases which are $10,000 or less merely for the purpose of permitting negotiation or utilizing the small purchase methods authorized under §§ 1-3.6 and 3-3.6.

[41 FR 22351, June 3, 1976]

§ 3-3.601 Purpose and applicability.

(a) Purpose. The objective of the simplified small purchase methods prescribed herein is to reduce administrative costs to the extent possible within the limits of applicable laws and regulations.

(b) Applicability. (1) The policies and procedures in 1-3.6 and this subpart shall not be used for the following:

(i) Procurements which are accomplished through delivery orders issued under indefinite delivery contracts, e.g., definite quantity contracts, requirements contracts, and indefinite quantity contracts.

(ii) Procurements made by formal advertising or negotiation other than by § 1-3.203, which were initially estimated to exceed $10,000, but ultimately resulted in a preaward price of $10,000 or less.

(iii) Small purchases which are initially estimated not to exceed $10,000, but ultimately result in a preaward price in excess of $10,000. If the price exceeds $10,000, the authority of 41 U.S.C. 252(c)(3) may not be used.

(iv) Construction requirements estimated to exceed $2,000. However, if the initial estimate is $2,000 or less but the ultimate preaward dollar amount resulting from quotations received exceeds $2,000, but does not exceed $2,500, award may be made pursuant

to the policies and procedures of § 13.6, this subpart, and the authority in 41 U.S.C. 252(c)(3) which is permitted by § 1-18.302. (See § 1-18.3 for policies and procedures pertaining to the procurement of construction by negotiation.)

(v) Procurement of architect-engineer professional services of any dollar amount. (See §§ 1-4.10 and 1-16.7 for policies, procedures, and forms pertaining to the procurement of A & E services.)

(2) This subpart does not preclude the use of bilateral purchase orders, Standard Forms 19 and 19B for construction contracts under $2,000 (see § 1-16.402-1), or a negotiated two-party formal contract for procurement not in excess of $10,000 where the procurement requires a specific contract provision relating to technical inspection or test, specification changes, government furnished property, insurance, patents, price adjustments, or the like. [41 FR 22352, June 3, 1976]

§ 3-3.602 Policy.

(a) Negotiation Authority. Negotiated contracts or purchases aggregating $10,000 or less shall be made under the authority of 41 U.S.C. 252(c)(3) and § 1-3.203 rather than under any of the other sections in § 1-3.2. For example, small purchases for expert or consultant services shall be made under 41 U.S.C. 252(c)(3) and 1-3.203 rather than 41 U.S.C. 252(c)(15) and 5 U.S.C. 3109, and small purchases which are set-aside for small business unilaterally or jointly shall be made under the authority of 41 U.S.C. 252(c)(3) and 13.203 rather than 41 U.S.C. 252(c)(1) or 41 U.S.C. 252(c)(15). The negotiation authority shall be cited on the face of the Standard Form 147.

(b) Placement of small purchases with small business concerns, labor surplus area concerns, and minority business enterprises shall be encouraged to the extent consistent with the objectives of this subpart. When source lists are maintained for procurements of $10,000 or less, these source lists should include known concerns in these categories. These concerns and enterprises shall be given opportunities, at least equal to other

firms, to submit quotations in response to small purchase solicitations.

(c) Mandatory Sources. Purchases shall be made in the open market only when requirements cannot be satisfied by requisition or order from mandatory sources in accordance with Part 1-5 or Federal Supply Schedule contracts in accordance with FPMR 10126.4.

(d) Limitations on the use of Small Purchase Methods. (1) The contracting officer has the responsibility and authority to determine which purchase method is most suitable, efficient, and economical for use in meeting the immediate requirement.

(2) The small purchase methods are designed to procure defined, off-theshelf, standard supplies, equipments, or services which may be awarded on the basis of a fixed price quotation. Small purchase methods should not be used to procure R & D, complex studies, services, and the like (which require judgmental technical evaluations and involved negotiations) where the award cannot be confidently made on the low price. Where procurements are not suitable for accomplishment using small purchase methods more formal negotiation methods or formal advertising should be used.

(3) Small purchases accomplished in accordance with this subpart may not be awarded on a cost-reimbursement basis.

(4) Consultants. Small purchase methods should be used with great prudence for the procurement of consultants to avoid the increased possibility at the higher dollar level of $10,000, of using consultants in an improper personal service capacity. Consideration should be given to § 3-22.2, Procurement of Expert and Consultant Services, prior to each purchase for consultant or expert services.

(5) Delegations of contracting officer authority for small purchases may be selectively increased from $2,500 up to $10,000 provided purchasing agents have met the selection requirements in § 3-1.404-1 and have a working knowledge of the requirements of this subpart. Personnel responsible for making and approving small purchases

should acquire formal training in this

area.

[41 FR 22352, June 3, 1976]

§ 3-3.603 Competition.

§ 3-3.603-1 Solicitation.

(a) Small purchases not exceeding $250 may be accomplished without securing competitive quotations where the prices are considered reasonable, but such purchases shall be distributed equitably among qualified suppliers. Records of purchases of $250 or less need not include justification for soliciting only a single source or a justification explaining how prices were determined to be reasonable. Operating agencies may reduce this limitation in accordance with agency requirements.

(b) For purchases between $250 and $2,500, solicitation generally may be limited to three suppliers.

§ 3-3.603-2 Data to support small purchases.

See § 1-3.603-2.

[40 FR 29716, July 15, 1975]

§ 3-3.603-50 Conduct of small purchases.

(a) Purchases not in excess of $500. (1) Competition. Purchases not in excess of $500 may be accomplished without securing competitive quotations. Such purchases are exempt from § 3-3.802-50 which requires a written justification for noncompetitive procurement. Purchases shall be distributed equitably among qualified sources. Purchases not in excess of $500 shall not be made repetitively to one source except for reasons which will clearly and convincingly justify a noncompetitive procurement in cordance with § 3-3.802-50. there are multiple sources available to provide an item or service, a quotation should be solicited from other than the previous source prior to placing a repeat order.

ac

Where

(2) Solicitation of Quotations. Quotations for purchases not in excess of $500 should usually be made orally but may be made in writing. If written solicitations are used, they must be ac

complished in accordance with §33.603-50(b)(6)(ii).

(3) Evaluation of price. The administrative cost of verifying the reasonableness of the price of purchases not in excess of $500 may more than offset potential savings in detecting instances of overpricing; therefore, action to verify the reasonableness of the price need be taken only when the buyer or contracting officer suspects that, or has information to indicate that, the price may not be reasonable, e.g., comparison to previous price paid, personal knowledge of the item involved. No written determination as to the reasonableness of the price is required except in instances where there is serious doubt as to the reasonableness of the price.

(b) Purchases in excess of $500 up to $10,000. The following describes the major considerations and steps involved in making purchases in excess of $500 up to $10,000.

(1) Specification-statement of work. The purchase requirement as described in a specification or statement of work must be clear and complete. Clarity is important to achieve effective competition because it enables all potential quoters to reach a common understanding of the requirement. A complete expression of the Government's requirement reduces potential misunderstandings in competitive procurements and increases the probability that the Government will receive what is actually required.

(2) Notice of intention to make a service contract. The requirement in § 1-12.905-3 to forward a Standard Form 98, Notice of Intention to Make a Service Contract, to the Department of Labor for any contract exceeding $2,500 also applies to small purchases over $2,500.

(3) Competition. Solicitation of competitive quotations from a reasonable number of qualified sources of supply shall be made to assure that the procurement is to the advantage of the Government, price and other factors considered. Generally, three is a reasonable number of sources for purchases in excess of $500 but under $5,000. More than three sources may be solicited at the discretion of the

officer. A

contracting reasonable number of sources for purchases of $5,000 up to $10,000 is a minimum of three. A maximum number cannot be specified apart from considering the nature of the requirement to be purchased.

(4) Noncompetitive purchases. Purchases in excess of $500 up to $10,000 which are made noncompetitively require justification as to why competition was not obtained. The justification, which may be in the form of a statement in the request for contract or requisition must address the considerations in § 3-3.802-50. The contracting officer may approve or disapprove the justification. Award of the contract or purchase order up to $10,000 by the contracting officer shall constitute approval of the justification.

(5) Synopsis (1-1.10). Small purchases of $5,000 and above shall be synopsized in the Commerce Business Daily in accordance with § 1-1.10 unless one of the exceptions in § 11.1003-2 applies. Synopses shall be sent to the Commerce Business Daily and due dates for receipt of quotations shall be timed so that there is a reasonable time for potential quoters to request RFQ's and submit quotations. Generally the synopsis should be mailed to the Commerce Business Daily 10 days prior to but not later than the day the SF-18 is released. Approximately 30 days should be planned between publishing of the synopsis and the due date for receipt of quotations. The synopsis should contain notice that the requirement is a small purchase.

(6) Solicitation of quotations. (i) Solicitations for purchases under $5,000 may be solicited either orally or in writing. Data to support oral solicitations shall be in accordance with § 13.603-2. Written solicitations should be used when (A) the sources are located outside the local area, (B) special specifications are involved, (C) a large number of items are included in a single proposed procurement, or (D) obtaining oral quotations is not considered efficient. Written solicitations for purchases under $5,000 shall be prepared in accordance with the following paragraph § 3-3603-50(b)(6)(ii).