5.1.1 Procurement Policies

Formerly Known As Policy Number: 51

This Guide Memo outlines university procurement policies. Detailed policies for common procurement activities, such as business and travel expenses, purchase requisitions, and purchasing cards, are contained in separate Guide Memos in Chapter 5. This policy applies to expenditures from all university funding sources. It should be used in conjunction with resources and procedural information on the Fingate website. This policy is based on and in alignment with the expectations set forth by Administrative Guide Memo 1.1.1: Code of Conduct and applicable federal regulations. 

Applicability:

This policy is applicable to direct payments and reimbursements of: 

• Purchases to be owned by the university
• Services provided to the university 

1. Purpose

The guiding policy for the university requires that expenditures be:

1. Reasonable and necessary
2. Consistent with established university policies and practices applicable to the work of the university, including instruction, research, and public service
3. Consistent with sponsor or donor expenditure restrictions

2. Roles and Responsibilities

Stanford manages financial risk through a distributed management model, enabling schools and departments to address their unique business needs while working within university policies. Only authorized persons may purchase goods or services on behalf of the university. Purchases by unauthorized persons will not be paid. Refer to Guide Memo 1.9.1: Signature and Financial Approval Authority for details about business unit financial authority delegations. 

a. University Board of Trustees 

Under the provisions of the Founding Grant, the Board is custodian of the university endowment and all university properties. The Board administers the invested funds, sets the annual budget, and determines policies for operation and control of the university.

b. President and Provost

The President and Provost set the strategic direction and priorities for the university.

c. Central Office Roles 

Central Offices provide and manage the ecosystem to enable effective and compliant procurement activities. The university’s distributed management facilitates purchasing decisions within this ecosystem. 

(1) Financial Management Services (FMS)

a.  Procurement Services key responsibilities include:

i. Supplier/vendor management: Onboarding suppliers and maintaining their records.

ii. Sourcing: When applicable, support departments in soliciting proposals from potential suppliers and independent contractors on behalf of departments and negotiating pricing 

 iii. Procurement contracts: Reviewing, writing, negotiating terms, and signing purchasing contracts on behalf of the university. Authority to sign procurement contracts is reserved to Procurement Services. 

iv. Purchasing: Facilitating the purchase of goods and services, through catalog or non-catalog purchase requisitioning or purchasing card (PCard) methods. 

v. Payment: Processing of payments for goods and services. 

vi. Reimbursement: Processing of and oversight of the reimbursement and expense request processes.

vii. Travel booking and support: Providing services that support business travel, including negotiating supplier agreements and pricing.

b. Capital Accounting 

Capital Accounting, within the Controller’s Office, is responsible for financial monitoring of capital projects. See Guide Memo 8.3.1: Capital Projects. 

(2) Land, Buildings and Real Estate (LBRE) 

LBRE is responsible for providing overall oversight of capital projects. Refer to Land, Buildings and Real Estate (LBRE). 

(3)  Office of Research Administration (ORA) 

ORA is responsible for research funding compliance, including approving capital equipment purchases above a specified threshold when they are paid from a federal funding source. Refer to the Office of Sponsored Research (OSR). 

(4) Office of the Chief Risk Officer (OCRO) 

OCRO advises on risk management associated with purchasing activities for the university. OCRO also assists departments with claims for damaged or lost goods. Refer to the Office of the Chief Risk Officer (OCRO).

d. Schools and Units

Schools and units are responsible for financial authority delegation, monitoring, and legal and university policy compliance. 

(1) School and Unit Leadership

Specific to procurement, school and unit leadership are responsible for:

• Communicating stewardship expectations with regard to appropriate and responsible purchasing practices, aligned to business unit strategies and specific business needs.
• Advising new and existing faculty and staff of purchasing policies and guidelines.
• Ensuring staff complete required training.
• Managing related local policies and guidelines.

(2) Departments within Schools and Units

Departments are responsible for the purchase of goods and services to meet their specific business needs. Departments are responsible for monitoring supplier performance in accordance with the terms of the contract or purchase order. Refer to Managing the Supplier Relationship and Record.

3. Purchasing Categories and Methods

a. Definition of Goods and Services

Goods are generally defined as tangible items such as supplies, materials or equipment. Services are generally defined as a transaction where work or action is performed and there may not be a physical good involved. Refer to Purchase Goods and Purchase Services for information.

b. Purchasing Methods

Procurement Services offers a variety of purchasing methods to optimize efficiency and compliance, including: 

(1)  Catalog methods

Amazon Business and SmartMart Catalog Suppliers, available in iProcurement, are the preferred purchasing method for goods at Stanford. 

(2) Non-Catalog requisition

If the goods or services are not provided by the university’s catalog or centralized program options, purchasers can initiate a non-catalog request. See Guide Memo 5.3.1: Requisition Processing.

(3) SmartMart Contracts

A signed contract is generally required when a business unit, school, or department would like to hire an external party to perform a service, including zero dollar ($0) agreements. Because these contracts bind or obligate the university to a financial or a non-financial commitment, contracts must be written and signed by an authorized university representative. See Guide Memo 1.9.1: Signature and Financial Approval Authority and contracts.

(4) Purchasing Card (PCards) 

Purchasing Cards (PCards) can be used to make eligible purchases, including paying for services purchased through a contract under certain conditions.

(5) Travel Card (TCards)

Travel Cards (TCards) should be used for individual travel and travel-related services. 

(6) Reimbursement of Personal Funds  

See Guide Memo 5.4.1: Business and Travel Expenses.

4. Sourcing and Competition

University policy requires that the purchase of goods or services be by competition to the extent possible based upon the total value, which includes considerations such as quality, price, and performance.

Prior to selecting a new supplier, departments can save time by reviewing the many existing methods to purchase goods and/or services, where pricing has been previously established through a competitive process. 

Procurement Services validates competitive supplier selection on non-catalog purchase requisitions that are above a specified threshold (sometimes referred to as the federal micropurchase threshold).

5. Special Materials, Licenses, and Permits

a. Obtaining Government-Required Licenses and Permits

Certain purchases require permits or licenses, as described below. In addition, when an international shipment is sent to Stanford, customs forms and fees as well as freight forwarding services will need to be provided by a customs broker. 

(1) Agriculture Permits

Contact the Environmental Health and Safety Office for more information.

(2) Import or Export Licenses

Contact the Stanford Export Control Office for more information. 

(3) Duty Free Entry of Scientific Equipment

The U.S. Department of Commerce may exempt payment of import duties for scientific equipment. Each department requesting such exemption is responsible for properly completing and filing Form ITA-338P.

(4) Radioactive Materials

A requisition for radioactive materials must contain a Controlled Radiation Authorization (CRA) number, obtainable from Health Physics Management System (SafetyStratus), before Procurement Services processes the order. Refer to Radiation Safety for more information. 

6. Payments

Accounts Payable pays invoices in accordance with payment terms negotiated in the agreement. Certain purchases require additional steps to confirm receipt. These include: 

• Capital equipment
• Subawards
• Goods or services above the department approval threshold

Refer to Purchase Order Invoice Processing on Fingate. 

a. Price Differences Between Invoice and Purchase Order

If an invoice amount exceeds the amount on the purchase document, Accounts Payable is authorized to pay the invoice without a written change order under the following conditions:

• It is a standard purchase order,
• The difference is within 10% of the purchase order amount, and
• The total difference does not exceed $250.

b. Freight Bills

(1) Prompt Payment Required

Federal and state regulations require Stanford to pay all freight bills within seven (7) days of receipt. 

(2) Terms

Procurement attempts to negotiate standard Free on Board ("FOB") Destination terms, which stipulate that title and risk of loss transfer to Stanford upon delivery to Stanford or another specified destination. If the supplier does not accept these terms, Procurement will negotiate for the supplier to prepay transportation charges and list them as a separate fee on the invoice. However, if shipping charges are unknown and not included on the issued purchase order, the supplier may prepay freight and separately invoice for shipping costs.

7. Exceptions

Exception requests to the procurement policy must first be approved by the appropriate VP/Dean’s office or designee.