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Safeguards Against Contract Overspending Coming July 5th

Posted Date: 06/23/2022


Office of State Procurement has requested an AASIS program change that will help safeguard against inadvertent contract (Outline Agreement) overspending. This change goes into effect on 07/05/2022 and is focused on Agency Contracts.

Purchases made against a State Contract are not affected by this change because quantities listed on state contracts are estimates and do not represent firm commitment to vendors.

Program Overview

The warning message that currently alerts agency personnel that a Purchase Order exceeds the Agency Outline Agreement (OA) will be changed to a hard error message. This means agencies will not be able to issue a PO if it results in spending more than is approved on an Agency Outline Agreement.

The hard error is triggered when a Purchase Order line item quantity or value exceeds the Contract line item quantity and value it references.

Example 1: If line item one (1) on an Agency Contract lists 10 as the quantity and a unit price of $50.00 each, the associated line item on the Agency Purchase Order cannot exceed 10 ordered materials nor can the value of the line (qty x unit price) exceed $500.00.

Example 2: Consider an Agency Contract has two (2) lines. Line one (1) lists a quantity of five (5) at a unit price of $100.00 each, resulting in a line item value of $500.00. Line two (2) lists a quantity of 10 and a unit price of $500.00, resulting in a line item value of $5,000.00.

If a PO is issued for a quantity of three (3) from line item one (1) of the contract and then a second PO is issued for two (2) more from the same contract line, no more POs can be issued in reference to contract line one (1). POs can still be issued against the unordered quantity on line 2.

As a result of the line item program validation, the sum total of the values of all the purchase orders issued in reference to an outline agreement cannot exceed the target value of that outline agreement.
If more purchases are required beyond the target value of the contract, the outline agreement must be amended to add the additional value before more POs can be issued. The amendment must occur before the validity end date.

Note: The above change applies only to agency outline agreements. The warning message will continue for purchases made against a State Contract. The quantities listed on state contract OAs are estimates and do not represent firm commitment to vendors.