Administrative Procedure 8.285 Administrative Procedure 8.285


Cost or Price Reasonableness


Administrative Procedure Chapter 8, Business and Finance
Administrative Procedure AP8.285, Cost or Price Reasonableness
Effective Date:  July 2019
Prior Dates Amended: October 2013
Review Date:  July 2022

I.  Purpose

To ensure that public funds are being expended to the best advantage of the University, this procedure sets forth the requirements for completing a Determination of Cost or Price Reasonableness.

II.  Definitions

The definitions set forth in Administrative Procedure 8.215 for the procurement of goods, services, and construction for the University of Hawai‘i shall apply to this procedure.

III.  Administrative Procedure

  1. OPM Form 95 Required.  OPM Form 95, Determination of Cost or Price Reasonableness must be completed for procurement actions of $5,000 or more in the following situations:

    1. sole source procurement;

    2. emergency procurement where only one quote is received;

    3. requests for quotations where only one quotation is received or the lowest responsive quotation is not selected;

    4. price adjustment to an existing contract other than changes to tax, shipping charges, or insurance;

    5. procurements exempt from the requirements of Chapter 103D, HRS, and the standard methods of source selection;

    6. competitive sealed bidding where only one bid is received;

    7. competitive sealed proposals where only one proposal is received; and

    8. professional services procurement.

  2. Price or Master Lists.  For purchases using price and vendor lists established by the State Procurement Office (SPO) or University master purchase agreements, a Form 95 is not required.  However, all instructions and procedures issued in conjunction with such SPO and University agreements must be followed by the purchasing department. 

  3. Price Analysis.  Price analysis is used to determine if a price is reasonable and acceptable. It should include an evaluation of the prices for the same or similar goods or services, a detailed discussion of research conducted, negotiations conducted with the vendor/contractor, or other efforts made by the program to validate the price paid to the vendor/contractor. Examples of price analysis criteria include, but are not limited to:

    1. price submissions of prospective offerors in the current procurement;

    2. prior price quotations and contract prices charged by the offeror or contractor for the same or similar items or services;

    3. prices published in catalogs or price lists;

    4. prices available on the open market;

    5. in-house estimates of cost;

    6. comparisons with expenditures of similar institutions;

    7. discount from contractor's normal fee; and

    8. prevailing rates in the industry or profession.

  4. Cost Analysis.  Cost analysis includes the appropriate verification of cost or pricing data and the use of this data to evaluate:

    1. specific elements of costs;

    2. the necessity for certain costs;

    3. the reasonableness of amounts estimated for the necessary costs;

    4. the reasonableness of allowances for contingencies;

    5. the basis used for allocation of indirect costs;

    6. the appropriateness of allocations of particular indirect costs to the proposed contract; and

    7. the reasonableness of the total cost.

  5. Procurement File.  For all procurements of $5,000 or more, a Form 95 shall be completed and maintained in the procurement file. 

  6. Federal Funds.  Cost or price reasonableness requirements for federally funded purchases of goods, services, and construction under extramural contracts and grants are set forth in policies and procedures established by the Office of Research Services (ORS) and the Research Corporation of the University of Hawai'i (RCUH).

IV.  Delegation of Authority

In accordance with Executive Policy 8.105, the Vice President for Administration and designees are delegated authority to carry out the responsibilities relating to the procurement of goods, services, and construction for the University of Hawai'i, consistent with applicable law and Board of Regents policies, and to execute contractual documents relating to such procurement actions.

V.  Contact Information

Office of Procurement Management, Tel. No. (808)956-8687

VI.  References

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Jan Gouveia
July 01, 2019
VP for Admin


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