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Use of Sole Source Form/Summary of Price and Cost Analysis Requirements: <br />Both sole source and emergency procurements require a written determination by the head of a purchasing <br />agency, or a designee, of the basis for the approval. This form is designed for approval of a"sole source," not <br />an emergency procurement. Consult with your procurement official regarding requirements for emergency <br />procurements. <br />This form should be completed and approved before formal negotiations leading to execution of an agreement <br />with a vendor where a competitive process (documented quote, sealed bid, or competitive sealed proposal) is <br />not used because a sole source is justified. <br />Normally, the actual pricing cannot be evaluated until after execution of the contract or issuance of the purchase <br />order. The price or cost analysis should be included with the procurement file before execution of a purchase <br />order or when the contract then it is routed for approval. <br />The methods of price cost analysis are explained in Chapter 5 of the Colorado Contract Procedures and <br />Management Manual. Normally, price analysis is not done in competitive solicitations where "adequate <br />competition" exists, because the competitive process takes care of the "fairness and reasonableness" of prices. <br />However, in a sole source situation where no price competition exists, some analysis must be done to insure that <br />the requirements of the controller's statute are met, i.e., that prices or rates are "fair and reasonable." <br />Common methods of price/cost analysis include: <br />a. Comparison of prices and rates to established catalog prices or market prices. In a sole source <br />situation, there commonly are similar prices or rates, e.g., those on price agreements, that can serve as a guide to <br />fairness or prices or rates proposed by a sole source provider. In some cases, e.g., some utilities, prices and rates <br />are set by law or regulation (utility tariff rates). <br />b. Historical prices or rates for similar items or services procured in the past also serve as a guide to <br />fair and reasonable prices. <br />c. In either case, even though neither historical or market prices involve the identical service, some <br />analysis can often be done which evaluates the differences in the types of services or goods, and concludes that <br />the nature of the differences warrant the differences in pricing. In other cases, judgments must be made that <br />proprietary aspects of the service or commodity warrant expenditure of the prices or rates in excess of what is <br />customary. <br />d. In cases where neither historical or catalog prices exist, cost analysis must be used. Vendors can <br />be asked to provide summary level detail of materials and labor costs, as well as markups and other indirect cost <br />rates included in the price. Technical judgments concerning labor hours can be applied to labor hour rates to <br />evaluate the reasonableness of the overall price. Reasonable profit, of course, is another element of price. The <br />Procurement Rules require the submission of cost or pricing data for noncompetitive acquisitions exceeding <br />$50,000. <br />DP-45-0996