Opportunity Cost

Advance or Repayment Request

The state, as a general practice, does not favorably view requests made by an entity for payments which may precede performance (advance payment) or during performance prior to completion or delivery (partial payment). Reference Section 4.24 of the University Purchasing Policy for additional information.

In accordance with state guidelines, advance payment for goods and services is only allowed in cases that accrue a fiscal benefit to the state in excess of the opportunity cost of not investing the funds for the duration of the service or delivery term.

Factors to consider when an entity has requested an advance or prepayment:

• Is there a financial benefit to the University?
• Is there a reduction in risk for the University?
• Is there a long lead time for product\service?
• Will the requesting entity be required to make a substantial initial financial investmenWill the prepayment increase risk to the University (financial stability of entity, potential obsolescence of goods\services, etc.)?

If your management team feels there is a justifiable basis for advance or prepayment, please proceed as follows:

• Complete the Opportunity Cost Calculation
• Provide in detail the business case for the advance\prepayment request
• Submit information to [email protected] or you may attach information to the purchasing requisition in eMarketplace
• Purchasing will review the request and advise of next steps

If you have any questions, please contact the Purchasing Office for guidance by calling us at 336.334.4104 or via email at [email protected].