The Split-Purchase That Wasn't a Split
A mid-sized Texas county's facilities manager needs to replace HVAC units at three buildings. The quote for all three together is $62,000. Her supervisor tells her to issue three separate purchase orders of $20,000, $21,000, and $21,000 to the same vendor so each stays under the $25,000 informal threshold and she can 'avoid the paperwork.' She has already received one written quote covering all three buildings from a single vendor. The county's purchasing policy mirrors state requirements for competitive procurement above the informal threshold. A colleague in the auditor's office flags the three POs during a routine review and asks the facilities manager to justify the structure.
1. Is structuring the purchase as three separate orders permissible? Identify the core issue and the risk.
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No. This is contract splitting - dividing a single procurement that reasonably should be one transaction into pieces to duck a threshold. The controlling fact is that the need is a single, foreseeable requirement (replace HVAC at three buildings) quoted as one package at $62,000. The threshold applies to the aggregate value of the procurement, not to how you slice the paperwork.
Risks:
- Circumvention of competition requirements - the county never ran the competition the $62,000 value demands.
- Audit findings and possible personal liability for the approving official.
- Void or voidable obligation - payments made outside authority can be disallowed.
The correct path is to procure the package competitively (or document a legitimate, policy-recognized exception such as an emergency or sole source), not to fragment it.
2. The facilities manager argues the buildings are separate 'projects,' so separate orders are legitimate. How should the reviewer evaluate that claim?
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Apply a reasonable-person / same-need test. Ask:
- Was the need known at one time? Yes - all three buildings were scoped together.
- Could one contract have served it? Yes - the vendor already quoted all three as a package.
- Is there a business reason independent of the threshold for separating them? Separate projects can sometimes justify separate procurements, but only if the separation is driven by timing, funding source, or genuinely independent scope - not by the dollar threshold.
Here, the supervisor's stated motive ('avoid the paperwork') is the tell. The reviewer should treat the three POs as one procurement, require competition at the $62,000 level going forward, and document the finding. If the work is already done, the county must still address ratification/ratification-of-unauthorized-purchase procedures and correct the process before the next cycle.