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F I S C A L I M P A C T R E P O R T

SPONSOR Altamirano

DATE TYPED 3/15/05

HB

SHORT TITLE Raise Procurement Code Small Purchase Limits

SB 350/aSPAC/aHAFC

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

Duplicates HB 368

SOURCES OF INFORMATION

LFC Files

Responses Received From

General Services Department (GSD)

Administrative Office of the Courts (AOC)

Department of Transportation (DOT)

Corrections Department (CD)

Energy, Minerals & Natural Resources Department (EMNRD)

Department of Finance & Administration (DFA)

Public Education Department (PED)

SUMMARY

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment to Senate Bill 350 removes the

SPAC committee amendment #1.

The amendment allows a central purchasing office to

•

procure services, construction or items of tangible personal property having a value not

exceeding $20 thousand instead of the $10 thousand in current law in accordance with

the applicable small purchase regulations adopted by the GSD secretary, a local public

body or a central purchasing office that has the authority to issue regulations.

Senate Bill 350/aSPAC/aHAFC-- Page 2

•

procure professional services having a value not exceeding $30 thousand instead of the

$20 thousand in current law, excluding applicable state and local gross receipts taxes, ex-

cept for the services of architects, landscape architects, engineers or surveyors for state

public works projects or local public works projects, in accordance with professional ser-

vices

A state agency or a local public body may procure services, construction or items of tangible

personal property having a value not exceeding $5 thousand instead of the current $15 hundred

by issuing a direct purchase order to a contractor based upon the best obtainable price.

The amendment also sets out the requirements for publication and procedures to be followed by

the state purchasing agent and other central purchasing agents when issuing an invitation for bids

(ITB).

The amendment also defines “prospective bidder” and states that central purchasing offices shall

send copies of the notice or ITBs involving the expenditure of $20 thousand or more to those

businesses that have signified an interest in submitting bids in the category of the ITB.

The amendment also allows a purchasing office to set different registration fees for different

categories of services, but states the fees shall be used exclusively for the purpose of furnishing

copies of the notices or ITBs for proposed procurements to prospective bidders.

In addition, the amendment sets out rules for deposits for prospective bidders and a central pur-

chasing agent’s duplication responsibilities.

The bill’s effective date is July 1, 2005.

Synopsis of SPAC Amendment

The Senate Public Affairs Committee amendment to Senate Bill 350 changes existing law by re-

quiring that a

central purchasing office shall send copies of the notice or invitation for bids in-

volving the expenditure of more than $25 thousand to the appropriate businesses. This raises the

current requirement from $10 thousand.

The balance of the amendment is clean up. The amendment also has an effective date of July 1,

2005.

Synopsis of Original Bill

Senate Bill 350 raises thresholds for small purchases in the Procurement Code, as follows:

•

small purchase limit or direct purchase order for products and non-professional ser-

vices from $15 hundred to $10 thousand;

•

formal sealed-bid competition for services, construction or items of tangible property

from $10 thousand to$25 thousand; and

•

small purchase limit for professional services from $20 thousand to $50 thousand.

Senate Bill 350/aSPAC/aHAFC-- Page 3

Significant Issues

This bill will raise the small purchases limits to levels comparable to many surrounding states. It

will improve efficiency of procuring products and services for all government agencies subject to

the Procurement Code.

Under current rules, three-quote competition would be required for services, construction or

items of tangible property between the current limit of $10 thousand and the proposed limit of

$25 thousand.

GSD states that raising the limits will allow a larger number of the low value procurements

which represent the bulk of procurement activity, to be processed by the requesting agency with-

out having to process paper through GSD. This will allow enhanced accountability and control

at the purchasing agency level, and expedite the procurement process for these smaller value

items.

FISCAL IMPLICATIONS

Expediting the procurement of small purchases will result in administrative savings.

ADMINISTRATIVE IMPLICATIONS

GSD will be able to focus more attention on higher value and more strategic procurements as

well as training outreach.

CD supports the bill as the provisions will decrease the time required to process the documents

by weeks on most purchases under $10 thousand, but CD notes it may increase the administra-

tive burden on CDs Administrative Services Division

DUPLICATION

Senate Bill 350 duplicates House Bill 368.

OTHER SUBSTANTIVE ISSUES

All responding agencies agree that raising the small purchases limits will result in more efficient

procurement.

DW/yr:rs:njw