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Price Rationale and Source Justification

Learn what the Professional Buyer requires in the Price Rationale and Source Justification sections on a Marketplace iRequest.

Definitions

Price Rationale:

Documentation through a review, analysis, or examination of the price proposed by a supplier and an assessment or evaluation as to whether or not it is fair and reasonable. Determining whether the pricing of a purchase is reasonable can be done through: Formal Competition, Quotes, Previous/ Historical Pricing, Published Pricing, andMarket Knowledge.

Source Justification:

Documentation that is required if the lowest bidder or lowest pricing submitted by a supplier was not chosen for the purchase. Recommending a supplier with a higher price can be explained using one or a combination of the following: Research Continuity, Unique Design, Compatibility, One of a Kind, University Standards, Delivery Date, Emergency, and Replacement Part.

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Price Rationale: Formal Competition (Request for Proposal from suppliers)

When a formal request for pricing on a good and/ or service is made public and suppliers submit a proposal based on what the customer has requested; this is typically used on orders equal to or greater than $100,000

Request for a Proposal (RFP) is a formal invitation to potential suppliers requesting that they provide a proposal outlining how they would fulfill a need for goods and/or services. An RFP also allows us to verify the supplier’s qualifications, experience, and approach that will provide the best solution.

Request for Quotation is a formal, written request to potential suppliers to provide a quote for goods and/or services. Unlike the RFP process, the determination of the awardee is based on price ONLY. There are limited criteria used to judge a supplier’s product or service quality. 

Request for Information (RFI) is a process for collecting written information about the capabilities of various suppliers. It is primarily used to gather information to help make a decision on what steps to take next. RFIs are often used in combination with an RFP or RFQ. In addition to gathering basic information, an RFI is often used as a solicitation sent to a broad base of potential suppliers for the purpose of conditioning supplier minds, developing strategy, building a database, and preparing for an RFP or RFQ.

Price Rationale: Quotes (Informal request for pricing from suppliers)

Definition:

Pricing documents from suppliers offering a price point on requested goods and/ or services that can help a prospective customer when deciding who to purchase from, and which services they are looking for.

Good example:

  • The UC San Diego requestor attaches at least 3 written quotations from different suppliers for the same or similar goods and/or services.  

Bad Example:  

  • The pricing for the goods and/ or services were obtained verbally from 3 suppliers.  
  • Quotations were obtained for goods and/or services that are not comparable (similar or close to), and they are so different that it cannot be explained in the source justification why the more expensive pricing is being chosen.

Helpful Hints:

  • Attach at least 3 written price quotations, including the quotation being chosen.  Make sure  the quotes contain goods and/or services that are the same or similar.
  • If the lowest price is not chosen, use the source justification section to explain why the purchase is being made from the supplier offering a higher price. 

Price Rationale: Previous Price

Definition:

When the same or similar goods and/ or services have been purchased one or more times in the past and the pricing being cited is comparable.

Good Example: 

  • The previous purchase order numbers and pricing are provided for the same or similar goods and/or services being purchased. If the quotation is higher than the previously purchased pricing, it is explained in the source justification.
    • “Similar item previously purchased on purchase order 90458300 at $308,079.00.”

Bad Example: 

  • The purchase order number provided is not for the same or similar goods and/or services.
  • The check box for Previous Price is checked but the purchase order number is not given.

Helpful Hints:

  • List all of the past purchase orders for same or similar goods and/or services along with the previous pricing. 
  • If citing previous pricing that is less than the quotation being chosen, explain the difference in pricing by comparing the past purchases to what is currently being purchased in the source justification section.

Price Rationale: Published Price

Definition:

Received supplier quotations that are compared to catalog or established price lists, market pricing, or comparable pricing offered to the Federal Government.

Good example: 

  • When completing a Marketplace iRequest, attach a supplier catalog, price list, market pricing, or government pricing from the internet 
    • UC San Diego is receiving a 35% discount off the manufacturer's original price for the part # 4465958. GSA pricing, for the most expensive part # 4465958, is $366,045.34 and the UC San Diego price is $337,350.00. Refer to the "GSA" attachment
    • GSA pricing, just for the most expensive part # 4465958, is $366,045.34 and UC San Diego price is $337,350.00. Refer to the "GSA" attachment

Bad example: 

  • When several suppliers offer the goods and/or services, but UC San Diego goes with one quote where the supplier is offering a discount

Helpful Hints:

  • Catalog or price listing is when a quotation has been received and is compared to what the seller has publically published or established as a price list 
  • Market pricing is obtaining pricing for what other suppliers are selling for their goods and/or services
  • Federal Government pricing is available on the internet for many goods and services
  • Attach competing supplier catalogs, price lists, and market pricing, and if the pricing being chosen is more than the competing pricing, explain why the more expensive pricing is being chosen in the source justification

Price Rationale: Market Knowledge

Definition:

Pricing based on prior competition, comparison to a similar item, sales of the same item to other universities or companies, independent university (in-house) estimate, and pricing from trade journals or trade shows.

Good example: 

  • Attaching quotations from prior proposal requests for the same or similar goods and/or services 
  • Obtaining written estimated pricing from suppliers while attending a trade show
  • Proposals from a similar purchase by the PI in 2009 while with the University of Illinois
    • Carl Zeiss - $105,101.15 
    • Olympus - $121,309.92
    • Nikon - $131,964.79

Bad example: 

  • Only check marking the box  but providing no supporting documentation
  • Stating “this is the best one in the market” or “these are the only guys that can supply it” but providing no supporting documentation - these examples speak to source justification, not price

Helpful Hints:

  • When looking at and researching suppliers for goods and/or services, always obtain written pricing from the suppliers, even if it is preliminary pricing. Or keep any pricing you find in a trade magazine or pricing given to you at a trade show.

Source Justification: Research Continuity

Definition:

Making sure that the research being performed is not interrupted, affected, or changed by the introduction of another good and/or service that will disrupt the continuity of the research.

Good example: 

  • This instrument is essential to research continuity based on the improved capabilities over an existing, now obsolete, instrument with a similar functional role. Our research increasingly requires adherence to federal and FDA guidelines for pharmaceutical bioanalysis, which cannot be performed on our existing (obsolete) mass spectrometer system.
  • In our outpatient service areas, having proper radiology equipment is a key element in our ability to deliver the high quality services that are expected of us. This particular piece of equipment has the appropriate level of sophistication and caliber required to meet and provide the demand in service often experienced by our team of experts (Radiology Licensed Personnel)

Helpful Hints:

  • It is helpful to ask yourself: Why is this good and/or service essential to preserving or working with your current data and producing future data that is considered valid in your research?

Source Justification: Unique Design

Definition:

Looking at the form (the shape, size, dimensions, and mass), fit (the physical interface or interconnect with another items or assembly), and function (the action(s) that an item is designed to perform) of an item in comparison to other items. 

Good example:

  • It can provide impact load by using a hammer up to 15 kg, and the impact rate can be higher than 20 m/s. The linear accuracy is 0.5%. There will be sample holding system to prevent bouncing.
  • Several Items will be purchased and assembled to establish a FRET imaging facility:
    • Nikon Inverted Microscope, the inverted research microscope from Nikon, has been developed for maximum flexibility in the live cell techniques and realized as a fully integrated research platform for cell observation and analysis, particularly for fluorescence imaging. It has the features for all the needs in our project, particularly
      1. the perfect focus system which can maintain the focus plane with high precision and hence provide a robust FRET measurement,
      2. a highly sensitive camera for the purpose of FRET imaging,
      3. a motorized stage with high precision for the efficient and automated identification of cells,
      4. three filter wheels for excitation, emission, and neutral density filters, a filter wheel controller and other optical elements.

Helpful Hints:  

  • Use form and function as a guide:
    • Form: the shape, size, dimensions and mass of the equipment
    • Function: does it meet the required specifications and performance

Source Justification: Compatibility

Definition:

The goods being purchased are capable of performing with another good without issue;  it is designed to work or operate with another good or system without modification.   

Good example:

  • We contacted a couple of competitors of Instron for the purchase of the impact tester. MTS's product may be of a higher quality, but it seems more fragile, not suitable to the lab environment where the machine will be mainly used by unexperienced students; moreover, the price of MTS is much higher by at least 30% (according to phone conversation with MTS's sales engineer), and the software is not compatible with the existing Instron tester in our lab. Other potential suppliers are in China; their products quality does not meet our requirements and there might be cumbersome import issues. Instron's product has a nice performance-cost balance. Its software matches with the existing testers in our lab, creating a continuous testing line.
  • This piece of equipment is a motion sensor to interface to the multibeam swath sonar installed on the USCG icebreaker HEALY, a Kongsberg EM122. The SeaPath 330+ is the most current model of motion sensor on the market and being from the same manufacturer works well with the EM122 multibeam, e.g. data formats are compatible.

Helpful Hints: 

  • Use fit as a guide:
    • Fit: how well does the good interface or interconnect with other goods, a system, or assembly 

Source Justification: One of a Kind

Definition:

There is only one person or company that can provide the goods and/or services needed, so any attempt to obtain bids would result in only one person or company qualifying to bid on it; this is also known as a “sole source.” 

Good example:

  • The Nikon Ti-E microscope is the only model which can provide a perfect focusing system which will allow a focus plane maintained during our live cell imaging. The detailed information are attached as follows:
    • Nikon Ti – E with Perfect Focus System
    • The Nikon Ti-E is the first fully automated instrument by a major microscope manufacturer capable of fast, robust (million-cycle MTBF actuators) multimode scanning of whole microtiter plates and slides. Combined with NIS-Elements image acquisition software, the Ti-E supports diverse imaging methods such as multi-dimensional time-lapse imaging to acquire temporal, spatial, and spectral information of fast, dynamic live cell processes. Intelligently designed automation (high-speed motorized nosepiece, fluorescence filters, shutters, condenser turret, and X-YZ stage) and further expansion of Nikon’s powerful modular approach make the Ti-E ideal for applications such as interaction of fluorescence protein molecules in living cells and tissues.

Bad Example: 

  • Stating “they are the only ones that make this equipment or can provide this service” but providing no supporting documentation

Helpful Hints: 

  • This is a sole source which does not preclude or exclude having to complete price rationale

Source Justification: University Standards

Definition:

Goods and/ or services being purchased must align with requirements, criteria, or specifications imposed by the University.

Good example:

  • Campus chairs must follow the ergonomic requirements established by EH&S
  • Paint used on campus property must align with the designated paint code

Helpful Hints: 

  • Typically used for Facilities related purchases.  Other cases include insurance requirements, liability requirements or publishing rights.

Source Justification: Delivery Date

Definition:

Only one supplier can meet the delivery date for what is being purchased.

Good example:  

  • During formal competition only one supplier could meet the delivery date 

Bad example: 

  • A campus department has known about a need to purchase a piece of equipment for 6 months but did not submit the requisition until 2 weeks before it was needed

Helpful Hints: 

  • Attach documentation that shows the required due date and obtain quotes from various suppliers that show the lead time/delivery time.

Source Justification: Emergency

Definition:

An urgent need for goods and /or services.

Good example: 

  • Equipment gets damaged rendering it unrepairable, putting research data collection at risk and only one supplier has the equipment in stock after checking the market.
  • There is currently a FRET microscope available located in my lab at science and engineering research facility (SERF 287), UCSD. However, because of the nature of our live cell imaging, each single cell observation takes a long time, typically several hours. Therefore, this FRET microscope is fully signed up and utilized at all time to meet the needs of my lab and collaborators. Indeed, the existing microscope has been used for more than 60 hours every week for the past three years. Even so, each lab member can only be allowed to sign up for 1 day of usage for every 10 days since there are more than ten people using this scope on imaging projects. This is the bottleneck of my lab and has significantly limited our productivity. The FRET imaging experiments proposed in my grants will impose a severe problem for the usage of the microscope given the time limitation of the scope. Furthermore, this scope has been intensively and continuously used for more than three years, which has resulted in frequent repair needs and interruptions of experiments. All these will further limit our productivity and impede the progress of our project. We hereby propose to establish a second FRET microscope to extend our capability and enhance the efficiency of our experiments.

Bad example:

  • A campus department has known about a need to purchase a good and/or service for 6 months but did not submit the requisition until 2 weeks before it was needed  and only one supplier can deliver with a higher price.

Helpful Hints: 

  • Provide documentation that explains the urgent need

Source Justification: Replacement Part

Definition:

An item that is part of an overall piece of equipment or system needs replacement and only the original equipment manufacturer makes and distributes the item

Good example: 

  • The stand on XYZ Company microscope breaks - you find out that the stand is specific to the microscope, and only XYZ Company makes the stand

Bad example: 

  • The stand on a generic microscope breaks, and there are several companies that can supply the stand but you go with the first one without looking at the other suppliers.

Helpful Hints: 

  • Provide documentation showing that the replacement part can only come from the original equipment manufacturer or from one source

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