Purpose

This Purchasing procedure provides guidelines for processing proprietary (sole source) purchases when competitive bids or quotes for goods/services are only available from one source known as proprietary purchase (Sole Source).

Definitions

Sole Source

Sole Source refers to a purchase defined in Government Code 2155.067 (a) where specifications and conditions of a purchase request describe a product that is proprietary to one vendor and do not permit an equivalent product to be supplied.  The specified product or service is only available for purchase through a single vendor e.g., manufacturer, publisher, service provider. Examples of sole source proprietary purchases include a back issue of a magazine available from only the publisher and an educational conference available from only the conference sponsor. 

There are four criteria where sole source justification may be requested:

1. Best Value

The Proprietary Purchase Justification must include the following information in order to document best value to the State:

(1) describe the product or service the agency proposes to purchase, and provide a statement regarding the agency’s business need and planned use; (2) explain why the agency specifications for the product or service are written as they are, and why those specifications are necessary to accomplish the agency’s goal for the procurement; (3) state the reason that no other competing products or services will satisfy the need of the agency and provide examples of the technical, practical, or operational risks that would occur if competing products or services are selected; and

(4) specify whether the purchase is sole source or competitive. 

Example: Best Value:

• If a product provides value that no other competitors can provide.  A company may have worked with UH in the past and have specific knowledge that can provide value to the institution.
• If UH employees are attending a convention on short notice, obtaining quotes from multiple hotels are not possible because there are no vacancies. 
• If a department is taking a trip abroad, the company that organized the trip may have access to specific sites, people, and companies that competitors do not have access to.

2. Proprietary Purchase Justification

A proprietary purchase is one where the specifications or conditions of the proposed purchase are proprietary to one vendor and do not permit an equivalent product or service to be supplied. The term “proprietary” refers to a product or service that has a distinctive feature or characteristic which is not shared or provided by competing or similar products or services. Proprietary purchases include products or services manufactured or offered under exclusive rights of ownership, including rights under patent, copyright, or trade secret law. 

Example: Proprietary Purchase Justification:

• Compatibility (parts and operation) with existing equipment.
• To maintain consistency and integrity of research projects, a Proprietary Purchase is necessary.
• A product is only available directly from the company or through the company’s sole distributor. For example, to use PeopleSoft, Oracle is required and is the only company that can provide PeopleSoft to customers.  No other distributor can be used to purchase PeopleSoft.

3. Contractual

This agreement is entered into between the University of Houston, a public institution of higher education of the State of Texas pursuant to Sections 111.01, et. seq. of the Texas Education Code, (“University”)  and   (“Contractor”) for the purpose of defining the services that the Contractor agrees to provide to University.  

Example: Contractual:  

• If the University has an existing contract with a vendor, contractually we are required to purchase from them.  Example: PeopleSoft Maintenance
• For the operation of a product/service, the vendor requires that UH purchases specific items.
• Voiding of warranty

4. Single Vendor

The only vendor that can provide the product and/or services. 

Example: Single Vendor:

• Scantron is the only company that can provide Scantrons.
• Speakers, entertainers, artists, professional services etc.
• Grant/Donor funds

Purchasing Procedures

• Department will forward sole source request to the buyer.
• Purchasing receives a Sole Source Justification form in their e-mail box.
• Buyer will review the justification form to make sure it is completed properly. If it is not completed, the form will be sent back to the department.

When a specification for a proposed purchase is drafted so narrowly that there is only one viable product or one vendor eligible for contract award, the agency must document the rationale for the

restrictive specification by placing a written Proprietary Purchase Justification in the procurement file (per Government Code 2155.067 (a), (c) and State of Texas Procurement and Contract Management Guide page 21). 

Purchasing will determine if specifications and conditions of a purchase request describe a product that is proprietary to one vendor and do not permit an equivalent product to be supplied.  Buyer will look to make sure the following are documented in the form:

1. Description of the product/service and business need/planned use
2. Reason those specifications are necessary to accomplish the agency’s procurement goal
3. Reason that no other competing products/services will satisfy the need (provide examples of technical, practical, or operational risks without the products/services)

• Buyer will make sure the Principal Investigator (PI) sign the Sole Source Justification Form is the purchase to be paid in part with federal funds per MAPP 04.01.01.
• Buyer will make sure Addendum C is completed and submitted by the department along with the Sole Source Justification Form, if the amount exceeds $100,000.00. If Addendum C is not submitted for the amount exceeding $100,000.00, the Buyer will send an e-mail to the department requesting the addendum. 
• After making sure the Sole Source Justification Form and Addendum C (if required) are properly completed by the department, the buyer will forward the document(s) to Purchasing Manager.Purchasing Director will approve or deny the Sole Source Justification.
• Purchasing Director will save all approved Justification Form in the Purchasing share-drive. (Finance (T) > Purchasing_New).
• Purchasing Director will approve Addendum C (if required). For all Athletics Department Purchases >$100,000.00 and all other purchases >$300,000.00, Purchasing Director will forward the addendum to the Executive Vice Chancellor/Vice President for Administration and Finance for his/her approval.  Once approved, Purchasing Director will save it in the Purchasing share-drive (Finance (T) > Purchasing_New) and also forward it to the department so they can include it in their requisition.  

Additional Information

The following are some examples for purchases that can be justified as sole source:

1. • • Equipment maintenance or repair parts from the original equipment manufacturer (OEM).
     • Pharmaceuticals or chemical reagents that are only available through one supplier.
     • Software or software maintenance that is only available through one software supplier.
     • Specific reagents used in long‐term experiments. For continuity of research, a lab would need to continue using the same products for the duration of the experiment
     • Compatibility with existing equipment. A laboratory is purchasing a new component from a supplier to add to an existing piece of equipment to enhance its quality/performance.
     • A contract or grant specifically names a supplier, product, or service that is required for the university to use.

Reference

• Government Code 2155.067
• Admin Code 20.25 (44)
• State of Texas Procurement and Contract Management Guide page 21
• MAPP 04.04.01