Behold the micro purchase, every school nutrition director’s favorite method of procurement!
It’s the easiest to do because you don’t do any price comparison – you just go buy it.
Because there are no price comparisons, it is designed to be used when getting quotes isn’t in the best interest of the program. This usually occurs when timing makes getting quotes unfeasible. Alternatively, it could be used when the cost is so low that getting quotes is impractical.
Common reasons for employing the micro purchase include emergencies, delivery shortages, small dollar purchases, one-time purchases, or seasonal purchases.
For example, here are some of the reasons we use micro purchasing in my district:
Maintenance supplies (valves, pipes, screws, filters, batteries, electrical tape, etc.).
When our maintenance team is at a school trying to fix something, it would be completely insane to ask them to get quotes from multiple stores when all they need is a screw. They’d never get anything done!
Product shortages.
If you’ve lived through COVID, you know what I’m talking about.
During that time, our regular distributor couldn’t get us gloves, which we need to remain compliant with the health department!
We called around until we found someone who had some to sell us, and we snagged them as soon as we found some. Obviously, we didn’t want to wait to get multiple responses and risk losing the ones that we could find.
Delivery shortages.
Our district doesn’t allow managers to just pop into grocery stores to get things they forgot or got shorted. We’re large enough they can ask other schools to help them out.
However, if it’s an item they absolutely need, we’ll use micro purchases to get it.
For example, we had a student who received almond milk as part of a special accommodation. The vendor let us know on Friday that they didn’t have any to put on the truck on Monday. Next, I picked some up at the grocery store over the weekend and delivered it to the cafeteria first thing Monday morning. Easy peasy.
3 Rules of the Micro Purchase
It might be the easiest method, but there are some rules about it you should know. These come straight from the federal regulation, 2 CFR 200.320.
Rule #1 You must keep below your micro purchase threshold for the aggregate amount.
I write in more detail about purchasing thresholds in my article titled Which Procurement Method Should I Use?, but here’s the gist. The aggregate amount for micro purchasing is the amount you estimate you will spend, usually on a single transaction.
Furthermore, micro purchasing can’t be used for amounts you know (or should know) will exceed your micro purchase threshold in that single transaction.
What’s more, you can’t intentionally split purchases to stay under the threshold either.
Rule #2 The price must be reasonable.
While you don’t have to get quotes ahead of time, you don’t want to blindly turn over your credit card either.
For example, if you rotate grocery stores for occasional purchases, you wouldn’t need to include a gas station that sells their groceries at prices you find unreasonable.
Specifically, the federal law states that each school district gets to decide what is reasonable, “based on research, experience, purchase history or other information and documents it files accordingly.”
Essentially, you do need to be able to justify why you think it is reasonable or not.
One good way to ensure you can prove you meet this requirement is to include the list of stores you will use for each category in your procurement plan. It shows you’ve given it thought ahead of time. Furthermore, you can gather and file documentation to use as justification. Below is an example of a chart that could be included in your procurement plan.
| Category | Procurement Method | Evaluation Used | Contract Award Type | Contract Duration/ Frequency |
| Last minute food/supplies | Micro Purchase | Rotate Food City, Walmart, and Publix | Fixed price | Each a one-time purchase; weekly transactions |
And don’t forget your documentation!
In the example above, I would have a file that includes my procurement plan, as well as sales flyers for the area grocery stores. For example, if I determined that I wasn’t going to use Whole Foods because of the significantly higher prices, I would include a Whole Foods flyer as well as flyers for Food City, Walmart, and Publix to prove that their costs are too high.
Rule #3 You should distribute micro purchases equitably among qualified suppliers.
This is commonly referred to as “spreading the wealth”.
Since you’re not doing price comparisons, and therefore, not creating competition, you create a fair system by spreading the purchases among suppliers, so they all have a chance to get some of your business.
Kind of like how you know you are your mom’s favorite, but she still has to show your siblings an equal amount of love.
Now, the law used to state that you “must” distribute micro purchases equitably, but it now states “should”. Therefore, you need to make attempts to distribute the purchases equitably, but the law is a little more lenient if you don’t.
“Equitably” could mean distributing them by the value of the transactions or by the number. For example:
By Transaction
You are printing brochures to pass out at school events throughout the year. You do a one-time purchase with a company called Local Printing. In March, you realize you are running out and are going to need to do another print run before the end of the year. Then, you go to Office Depot to print another smaller set. The values were:
- 1 transaction with Local Printing, total spent $450
- 1 transaction with Office Depot, total spent $80
Even though the values were not similar, you did an equal number of transactions with the two printers. Therefore, you are still compliant. If you had returned back to Local Printing for the second set, you would have been out of compliance.
By Value
You need to regularly purchase maintenance supplies and don’t want to price compare every nail you buy. There are a lot of Ace Hardwares around the whole district, but only one Home Depot and one Lowes. Thus, Ace is much more convenient.
In this case, you can use Ace frequently for most of your everyday small dollar transactions and use Home Depot and Lowes for higher dollar transactions. Your goal is to aim for the purchases to equal roughly the same at the end of the year:
- 30 trips to Ace Hardware, total spent $1,027
- 8 trips to Home Depot, total spent $858
- 5 trips to Lowes, total spent $1,215
Since you attempted to spread out the purchases by value, you are compliant.
But what if I only want to shop at the place with the lowest price?
If you know they have the lowest price, then you did price comparisons and that’s not a micro purchase silly!
Some people get tripped up thinking about the thresholds. Just because it’s below $10,000, doesn’t automatically make it a micro purchase.
It’s a micro purchase if you purchase it without price comparisons.
However, if you just generally know that one location has better pricing, you can do quotes or a market basket analysis to keep purchasing from them.
Alternatively, you can exclude a specific retailer due to prices you don’t find reasonable, which you must document. Otherwise, you should spread out your purchases.
Records Maintenance
Don’t forget to save your records for every purchase!
You should receive either an invoice or receipt. However, you may need to ask for an itemized receipt. That little signed ticket where it just shows the total amount of your purchase isn’t enough. Ask for an itemized receipt instead that details what you purchased and the quantities.
You might have a voucher, purchase order, or canceled check for the purchase. Save those too.
My district also logs each transaction on a separate spreadsheet, which helps during a procurement review.
The federal regs say you need to keep your records for three years plus the current year. Even still, some states might have longer recordkeeping timeframes for purchasing data.
Micro Purchase Scenarios
Let’s look at some micro purchasing examples.
Scenario #1: You need a new booster heater for your dish machine.
The service technician says that the booster heater will cost $9,800, and the labor is going to cost $550. Given this, you ask him to bill you for the part when it comes in and bill you for the labor when he installs it. Are you compliant?
No, assuming you have a $10,000 micro purchase threshold. The total aggregate cost of this repair is $10,350. You can’t split the cost into two invoices to keep under the micro purchase threshold.
Scenario #2: You’ve been using an old donated espresso machine for a coffee program at your high school, and it has been going over really well. But then, the machine breaks.
You want to replace it as quickly as possible to reduce revenue loss, so you don’t want to wait for quotes. You find a similar machine, but it is going to cost $13,000 to buy it new. Alternatively, there’s another with a few less bells and whistles for $9,000 that will still work for your program. You buy the $9,000 one. Are you compliant?
Yes, assuming you find the price reasonable, and you are rotating your equipment micro purchases. While you can’t intentionally split a purchase, but you can modify your order to intentionally stay under the micro purchase threshold.
Scenario #3: The bread delivery driver shorted you 10 packs of hamburger buns on your bread order.
They were needed for a cookout planned for tomorrow. You run to a grocery store and discover that while you normally only pay $2.10 for a 12-pack of burger buns, the grocery store is selling them for $2.88. You shop at this store regularly, and this is the typical price for retail hamburger buns. So, you buy them. Are you compliant?
Yes, assuming you are rotating your grocery store purchases. While the price is a little higher than what you typically pay, that is expected when buying off contract. As long as you find the price reasonable and can show proof later justifying that it is reasonable, you are compliant.
Scenario #4: You purchase lettuce from several local farmers periodically and rotate which farmer you use.
Prices vary based on market conditions. However, you typically pay $0.80-1.05 per head, and delivery fees range from $0 to $10 per site. A new greenhouse opens in town, and they offer you lettuce at $1.25 per head with a $50 delivery fee per site. While you think that delivery fee is ridiculous, you know you’re encouraged to buy from all suppliers, so you do. Are you compliant?
No. The price must be reasonable. If you find the price “ridiculous”, and you pay it anyway, you’re not compliant. The $1.25 per head price is probably justifiable because it’s greenhouse-grown. But a $50 delivery fee (when you historically got it for $0 to $10) would be unreasonable. You would just file away the documentation showing what they were going to charge you, and you do not need to use this vendor.
Scenario #5: You only spend $200 per week on disposables, $8,800 per year.
Since both the weekly and annual amount is under the micro purchase threshold, you don’t get quotes and just have your disposable distributor (US Paper Company), bill you with what your cafeterias buy. Are you compliant?
No. You should distribute your purchases to all qualified suppliers. Since you are regularly purchasing items from the same supplier, you need to do a small or formal method of procurement.
Scenario #6: Your school is located in a rural area.
There is only one grocery store within a 40-mile radius, so this is the only store you use when you are short on product. Are you compliant?
Yes. Given, that you can justify that there is only one qualified supplier, you can use just one. However, you will need to be able to justify this.
If it were me, I would put together a file with my procurement plan. The file would include:
- my procurement plan,
- a Google map printout showing the location of the next closest grocery store(s), and
- a written statement (nothing fancy, just at the bottom of the map) that it would not be an efficient use of program funds to travel that distance.
Basically what you’re doing here is proving to an auditor that you gave it thought, had a plan all along, and can explain why you’re doing what you’re doing. Surely this is better than getting into a back-and-forth on the day they are auditing you.
Scenario #7: The forecast is calling for a hurricane, and you want to have some shelf-stable milk on hand in case of emergency.
In this situation, you don’t have time to get multiple quotes, but you estimate it will cost $1,920 per pallet because that’s what you paid with a different company a few years ago. You call the manufacturer to make arrangements and ask them to email you the price for 3 pallets of chocolate and 2 pallets of white, thinking that would put you under $10,000.
When the price comes back, it actually is going to cost $2,110 per pallet ($10,550 total). Since 5 pallets would put you over the micro purchase threshold, you tell the manufacturer to just deliver 3 pallets of chocolate and 1 pallet of white ($8,440 total). Are you compliant?
Yes, assuming you still find the price reasonable. While you can’t intentionally split a purchase, you can modify your order to intentionally stay under the micro purchase threshold. Additionally, it sounds like you used a different company the last time you did this. Therefore, using a new company will allow you to meet the equitable distribution requirement.
Scenario #8: School starts in three weeks, and your cafeteria manager has a great idea to do a made-to-order sandwich line.
She will need a special ventless, tabletop oven that costs $15,000. Since there is a three-week lead time on this equipment, and school starts in three weeks, you don’t want to create a delay by requesting multiple quotes. Therefore, you label it an emergency and do a micro purchase. Are you compliant?
No. While an “emergency” is a good reason to do a micro purchase, it must be under $10,000 to call it a micro purchase.
While the federal law does permit noncompetitive procurement for purchases >$10,000 when “the public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation,” wanting to start a new sandwich program on the first day of school really isn’t serious enough to call it an emergency.
The first time I ever heard USDA authorize this type of non-competitive procurement was during COVID when schools were struggling to obtain supplies, so the bar is pretty high for what they consider a permissible emergency for over >$10,000.
Scenario #9: Those darn scoops keep disappearing.
You need to buy a batch, so you email several restaurant supply companies to see what the cost would be. Once they each respond, you purchase from KaJoe, who had the lowest price at $243.
A few months later, your high school wants to start a homemade pizza program, and you need to purchase them some pizza pans, pizza cutters, dough dockers, etc. You email the restaurant supply companies again. The same company KaJoe is lowest again at $89, so you buy from them again. Are you compliant?
Yes, but this is not a micro purchase!
Since you did price comparisons, you actually classify these purchases as small purchases. When you emailed multiple vendors for pricing (assuming you did the proper thing and gave them specs with preferred brands that said “or equal”, etc.), you were getting quotes.
Remember, the method you classify a purchase by is based on the processes you actually used, not necessarily the dollar amount.
Summary
The micro purchase is one of the easiest, but you do need to keep the 3 rules in mind. keep it under your allowable threshold, only purchase it if the price is reasonable, and distribute your purchases
