HomeMy WebLinkAbout5B - City Purchase Policy Revisions
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
CITY COUNCIL AGENDA REPORT
MAY 5, 2008
5B
Ralph Teschner, Finance Director
CONSIDER APPROVAL OF CITY OF PRIOR LAKE PURCHASE POLICY
REVISIONS
Introduction
The purpose for the proposed language change is to amend the purchasing
policy of the City to be consistent with Minnesota Statute 471.345. This statute
establishes the competitive bid threshold.
Historv
The bid threshold was last increased by the legislature in 2000 from $25,000 to
$50,000 in response to inflationary increases. Specifically any purchase of
$50,000 or more was subject to competitive bidding procedures set forth by
statute. Corresponding to this change in the competitive bidding threshold, the
City Council on May 7,2001 approved Resolution 01-52 whereby a formal
purchasing policy was adopted that incorporated this increase.
Current Circumstances
On April 17, 2008 the Governor signed into law that changed the competitive
bid threshold. The new law increases the contract threshold amount that
triggers the competitive bidding requirement from $50,000 to $100,000. The
law will be effective on August 1, 2008. Under the competitive bidding statute,
a contract is defined as an "agreement entered into by a municipality for the
sale, purchase or rental of supplies, materials or equipment or for the
construction, alteration, repair or maintenance of real or personal property".
If the amount of a contract is estimated to exceed $25,000 but not to exceed
$100,000 for municipalities larger than 2,500 in population, the contract may
be made either upon sealed competitive bids or by direct negotiation. If
solicitation or direct negotiations is used the statute requires obtaining two or
more quotations except in certain narrowly defined circumstances. Once the
City elects a procurement method, it must adhere to it.
If the Council agrees to reconcile the provisions of the new statute, the City's
official purchase policy would be changed as well to reflect the updated
$100,000 competitive bid level. Outlined below is our purchase policy guide
index that indicates the shaded proposed changes.
L..'::':':~:~:~~~~~~:S~:~~:~:::::::::]'..~:~:~~'~:~~~::?:~~~t:?:~~?:~~~!:~:!:~:~::::::]::::::~~~~~~~~~::~~~:~:~t:!.~..:]
l::::::::::::::::::::~:::::::~:~::~~:~:~:~::::::::::::::::::::L::::::::::::::~:~~?:~:~~::~:~:::~:~~~:~::~:::~:~:::::::::::::::::J::::::::::::::~:~~~::~:~~~::::::!~:~::::::::::::::::::1
!....................~~~~..~.~..!.9..9.9....................f................p.lJ..r.9.~.~.~~...Qrt.1.~r....!r~!.t.!~Je . .........Q.~P~..~.~p~r.Y.!.~.2E...............i
r::::::::li:;:9.:9.Qj9.J?:;:$.QQ:::::::::::t:::::::::::::::::::::::::::::::::p.::9.:;Z9.~:i?I~~::::::::::::::::::::::::::::......~...............p..~p.f$.:~p.~fY!~9.f.:::::::::::::::!
i::::::::::ffi.?;:~9.5jQJ?:9.:;:Q9.9.:::::::::t:::::::::::::::::::::::::::::::::p.3?::Z9.~:9.I~~~:::::::::::::::::::::::::::::::::I::::::::::::::::::::9.!jY.:::M~6:~:ii~E::::::::::::::::::1
www.cityofpriorlake.com
Phone 952.447.9800 / Fax 952.447.4245
ISSUES:
FISCAL IMPACT:
ALTERNATIVES:
RECOMMENDED
MOTION:
Revrved by:
.~
Frank BOY", C, ty'
ATTACH~
...........................................................................................................................................................................................................................................................................
. . . .
. . . .
. . . .
. . . .
L::~~~::~:~:~:::~~::~!:~:~::~~~::::::L:::::::::::::::::::::~~~?:~!:~:::~~~:~~~~~~?:::::::::::::::::::::::::L::::::::::::::::::~~~:~?::~?~:~~:::::::::::::::::::J
!.............A.~p.y..~..~.1.Q.Q.!.Q.Q.Q............l........~.!~~!.9..9.Qp.~r~~!y.~...Ag.f..~~m~.~.~.~.......J.......................9!!Y....9..~.~.~g!!......................j
*Written quotes or a completed quote form is to be attached where there is
more than one feasible source.
The proposed change in the City's Purchasing Policy adopts the newly
enacted provisions of state law. While the change in our purchase policy
simply makes our method of purchase consistent with state statutes the
Council may choose to use the competitive bidding process for any project
regardless of cost.
This legislative change was initiated by the Minnesota Association of
Townships and endorsed by the League of Minnesota Cities and the
Minnesota Inter-County Association. It affords governmental entities greater
flexibility and cost savings for purchases under $100,000, because it
eliminates publication expenses, bid bonds and bid document expenses that
typically increase the cost of a purchase.
The following alternatives are available to the City Council:
1. Approve the revisions to the Purchasing Policy as presented.
2. Amend the Purchasing Policy thresholds to something greater than
$50,000 but less than $100,000.
3. Defer action if the Council requires additional information.
Alternative #1 - Motion and second to amend the City of Prior Lake Purchasing
Policy to reflect the new competitive bidding threshold set out in State Statute
and provide an effective date of August 1, 2008 as part of the consent agenda.
I
.....
anager
1. Purchase Policy Guide Index.
2. City of Prior Lake Purchasing Policy
;:j rR~
cO'1> ~ 4646 Dakota Street S.E.
U ~ Prior Lake, MN 55372-1714
~ ~ / CITY OF PRIOR LAKE PURCHASING POLICY
. ~ 5/05/08
Minnesota Statutes 471.345 and Prior Lake City Code 106.500 set forth the laws regulating
purchasing in Minnesota Municipalities. Attached is an information document from the League of
Minnesota Cities regarding competitive bidding and statutory references. These guidelines are
intended to clarify and expand upon these legal requirements. Shown below is a quick guide to City
purchasing showing dollar amount, process and the level of authority. See the remainder of this policy
for detailed information.
Purchase Level Purchase Order/Quotes/Bids Approving Authority
$0 - $1 00.00 ................1.. ..............E.3..I~.Q.~.f:l.~.P.lJ..r.~~~~~..9.r.~.f:l.r.........................L..........p.~p..~r.:t.r.D.~n.t?lJ.p'l:l,ryi.~.9.r............
.............::::::~~:~~::!:6:~~lIQQQ....................,...................p..lJ..r..c::.b.l:I.~.f:l..9..r.~.~.r....I.~.i!i.~!~.~.......................L..........P..f:lP..~r.:t.r.D.~.Q.~..?lJ.p.f:l.ry.i.~.c:lE...........
...................~J..9.9.9...:.J??.9..9............... ........L...................................P..:.9.:J. Quotes * ' ......P~p.l:i.r.:t.r.D.~.Q.~..?lJ.p.f:l.ry!.~.9..r.............
.......~??.9..1:::..~.?..9.!.9..9..9...................L...............................P.:.9.:J..9.lJ.otes* .......9i.ty..Ml:i..Q~.g.~.r.......................
...........~?.9.!.9.9.1:..~ 1 00 lQQ_Q~_..__j___.........._______9.9.!:.I_~.c::.~LB_~.~<?!~~.9.~____m_.._m__._m__'_..______m.._..__g~tyS:.9.lJ.El.c::iL__.___................ ...........
.....................A.~.c:l.Y..f:l...~1 00 lQ.Q.9._..._..._......_1.........._..~..i.Q~..L9..9.QP_~r.~!~'t.f:l._~9!_~~.f!1.f:l.~!~........___L..._..............._.....m..g!ty..g.9.lJ.D..c::i!........_...__...........--. ..
* Written quotes or a completed quote form is to be attached where there is more than one
feasible source. Purchases above $20,000 not subject to bid requirements must be approved by City
Council resolution.
There are six basic thresholds of dollar amounts that have been established either by policy, city code
or statutory authority for the purpose of purchasing city goods and services. They are identified as
follows:
Blanket Purchases
Purchases of $100.00 or less may be made at the following vendors who have been issued a year-
long blanket purchase order whereby the purchase may be simply approved without a purchase
order. The receipt should be signed by the individual so that the when the invoice is received it may
be directed to the appropriate department for account code assignment.
The vendors with 2008 Blanket Purchase Orders are:
www.cityofpriorlake.com
Phone 952.447.9800 / Fax 952.447.4245
..( Deleted: 50
{Deleted: 50
)
1
AI's Tru Value
Apple Ford Shakopee
Boyer Ford Trucks
Bryan Rock
Carlson Hardware Co.
Carquest
Catco Parts & Service
Creative Graphics
Cub Foods
Factory Motor Parts
Fastenal
Filterfresh
Force America
Gall's Inc.
Green Man Technologies
Harold's Locksmith
Hawkins Inc.
Kraemer & Sons
Lano Equipment
MTI Distributing
MacQueen Equipment
Menards
Monnens Supply
NAPA Auto Parts
New Prague Ford
Northern Tool
Novak's Garage
Office Max
Prior Lake Aggregate
Prior Lake Rental
Snyder Drug
Target
Tim's Small Engine
Tractor Supply
Vermeer of MN
Village Market
Wolf Motors
Zee Medical
~\PUReHASE\Purchasepolicy.RED~INED.do~
"
.1/22/93
,( Deleted: 11 )
, (Deleted: 1/22/03 .-J
Purchases Less Than $1000
Expenditures within this category should generally be preceded by a minimum of two quotes if the
expenditures are anticipated to be on a re-occurring basis as opposed to a one-time occasional
purchase. These may be obtained verbally from vendors. The purpose is to obtain the best price
available initially subject to established quality standards. The purchase order need not include
written quotations. The Department Head may approve such purchases.
Purchases $1000 - $2500
Purchases approved within the current year's operating budget shall be authorized by the Department
Head via a purchase order with two quotes on the quote form where there is more than one feasible
source. The required procedure is to complete a purchase order prior to acquisition to insure
accountability, provide amount verification and avoid any misunderstanding with respect to cost
between the vendor and the City.
Normally all purchase orders are to be completed before a requisition number is provided. The
process involves the following steps:
1. Complete the Purchase Order as to vendor, date, material description, unit price, total
department and account code.
2. Attach completed quote form.
3. Department Head authorizes by signature and sends to Accounting.
4. Purchase Order number assigned by Accounting Department.
5. Purchase order sent by originating department.
Field employees will be expected to plan and coordinate their acquisitions with their respective
supervisors and department heads to eliminate verbal P.O. numbers unless situations occur where it
would not be practical because of time constraints. There are four general exceptions to the rule:
1. Routine items costing $100 or less that are frequently purchased from the same vendor
may continue to be purchased under a blanket purchase order.
2. Service repairs on equipment and vehicles do not generally require a purchase order
unless price quotations are necessary.
3. Sand, rock, bituminous etc., because of quantity uncertainties, may be purchased under a
blanket purchase order number.
4. If an emergency situation should occur, acquisition may be followed up by a purchase
order.
When a verbal purchase order number is used, the following information is absolutely necessary:
1. ReceipUinvoice of purchase.
2. ReceipUinvoice must indicate description of purchase (parts # is not acceptable).
3. ReceipUinvoice must indicate dollar amount.
4. ReceipUinvoice must be signed.
5. ReceipUinvoice must display Purchase Order number.
6. Salesman shall not be given verbal P.O. number.
7. Written purchase orders will be submitted within one week of verbal authorization.
Purchases $2501 - $20.000
City purchases approved within the current year's operating budget shall be authorized by the
Department Head via a purchase order. In addition, all such expenditures exceeding $2500 must also
be approved by the City Manager in the form of his signature upon the purchase order. The required
procedure is to complete a purchase order prior to acquisition to insure accountability, provide.{ Deleted: . .1/22/03
H:\PURCHASElPurchasepolicy REDLINED.doc,. 3 ~.
amount verification and avoid any misunderstanding with respect to cost between the vendor and the
City. Written quotes or a completed quote form must be attached where there is more than one
feasible source.
Normally, all purchase orders are to be completed before a requisition number is provided. The
process involves the following steps:
1. Complete the Purchase Order as to vendor, date, material description, unit price, total
department and account code.
2. Written quotes or completed quote form are attached.
3. Department Head authorizes by signature and sends to City Manager.
4. City Manager approval by signature on purchase order.
5. Purchase Order number assigned by Accounting Department.
6. Purchase Order sent by originating department.
., Deleted: ~
Purchases Between $20.000 and $,100.000..
When there is more than one feasible source of supply for an item having a cost of twenty thousand
dollars ($20,000) or more, the City shall request written price quotations from at least two (2) sources
and shall place the order at the lowest price quoted. provided the items are of comparable quality.
The quotes shall be submitted in written format. The City Manager shall have the authority to make
or let purchase contracts for routine service equipment or supplies for which the cost does not exceed
twenty thousand dollars ($20,000). Prior Lake Code 106.500 (5). Purchases above $20,000 not
subject to bid requirements must be approved by City Council resolution.
PurchasesExceedina$..100.000.. ... ... ..un"""" ............ .......... . / jDeleted:~
There are three processes available that would satisfy statutory requirements for purchases that are
above $.1 OO,ooo.oo.l Deleted: 50
I. Purchases Through Cooperative Purchasing Organizations
The City is a member of various cooperative purchasing organizations; State of Minnesota
Cooperative Purchasing Venture, Hennepin County Cooperative Purchasing Group and a Street
Maintenance Joint Powers Agreement. From time to time the City, together with other public
agencies (cities and counties) will jointly purchase goods and services. Each of these organizations
is created to facilitate cost effective purchasing using the bid system. Each organization prepares
specifications based upon the needs of the members, solicits bids, evaluates bid proposals and
awards a contract to the lowest responsible bidder. Member agencies then purchase from the
authorized vendor without the need to prepare individual specifications for each and every purchase
and complete otherwise required statutory purchasing procedures.
A product or service in the approved operating budget or capital improvement program may be
acquired using cooperative purchasing agreements as follows:
1. A copy of the cooperative agency specifications and bid award contract document for the
product or service is acquired.
2. The department making the purchase determines that the specifications and bids
received conform to their needs and represent cost effective acquisitions by reviewing the
proposed acquisition with cooperative purchasing acquisition professionals, department
personnel, city fleet maintenance mechanic and others as appropriate.
3. An agenda report is prepared for City Council consideration authorizing acquisition of the
product or service. If the equipment is replacement, the item being replaced is made
available for viewing at the Fire Station before and during the City Council meeting.
II. Purchases Made Outside of the Cooperative Bidding Process
~\PURCHASE\Purchasepolicy REDLINED~doG-.
.lL22LQ3.
.j Deleted: 11
{ O;illted: .
I
I
1/22/03
If the amount of the contract is estimated to exceed S.100,O()0'nandfun~sareC3f)propriatEldn\Vithin - 1 Deleted: 50
the current operating budget or capital improvement program, sealed bids shall be solicited by
publiC notice at least 10 days before scheduled bid opening following preparation of bid
specifications as authorized by the City Council. The successful bid is to be awarded by the City
Council to the lowest responsible bidder. (Minnesota Statutes 471.345)
The basic process for competitive bidding is outlined below. This process does not apply to public
improvement projects financed through special assessments pursuant to Minnesota Statutes
Chapter 429 which prescribes the process to be followed.
1. Solicit Council authorization to prepare procurement documents.
2. Prepare specifications.
3. Share draft specifications with City Attorney and City Manager for comment.
4. Purchasing department modifies the specifications as appropriate.
5. Solicit Council approval of plans and specifications. request for proposals and
authorization for advertisement for bid.
6. Prepare a public notice for Prior Lake American.
7. Publish 10 days in advance of bid opening.
8. Purchasing department analyzes bids for conformance with specifications and prepares
bid tabulation.
9. Recommendation is provided to City Manager together with the draft agenda report and
recommendation.
10. City Manager and City Attorney provide comments for inclusion in agenda report.
11. City Council considers the recommendation and acts upon the purchase. If the purchase
is for replacement equipment, the item being replaced is made available for viewing at the
Fire Station before and during the Council meeting and maintenance and other pertinent
information is supplied by Fleet Maintenance personnel.
12. Standard City Contract is prepared.
13. Execute contract with Mayor and City Manager signatures.
III. Non-Competitive Supplies or Equipment.
If the City is purchasing a product or service which is available from only one source (such as
street lights in an electrical franchise area), the acquisition will be made in the same fashion as a
purchase between $20,000 and $.100,000. ..
i Deleted: 50
Construction Contract Purchases Exceedina $100.000
The process is the same as above except the publication must be at least 21 days before bids are
publicly opened for improvement projects that are assessed under Minnesota Statute Chapter 429.
Also the advertisement must be published at least once in the official newspaper and at least once in
the Construction Bulletin.
Contract Chanaes
A contract approved by the City Council for construction/professional services may be increased or
decreased by written change order up to $50,000 provided such modification does not exceed 25% of
the original contract amount in the aggregate and the item which is increased or decreased was part
of the original bid award. Any change order exceeding $50,000 must be approved in advance by the
City Council. The City Manager may approve a change order not exceeding $50,000 if one of the
following circumstances exists provided the contractor/vendor apprises the staff of the necessary
changes, an estimate of the costs and reasons for the changes prior to actually conducting the work:
.{ Deleted: ~
rD~leted: . . 1/22/03
I
I
!"-:\PURCHASElPurchasepolicy REDLINED.do~
....- -.----- ,---------_. .---------- - _.------- - ----
l.j22@
1. A delay in obtaining prior City Council approval will impede the progress of the project and a
delay in obtaining prior City Council approval may, subject to the contract documents, result in a
claim by the contractor for additional costs caused by the delay.
2. Where the public health and safety are in jeopardy, the City Manager may authorize a change
order in excess of $50,000. In such a case, the City Manager shall endeavor to contact as many
members of the City Council as practical under the circumstances. The Open Meeting Law
prohibits the City Manager from disclosing to any Council member his or her discussion with
another Council member.
3. In cases where approving the change order will result in a savings to the City.
Any request for change order must be certified as true, correct and accurate by the maker to
avoid fraudulent requests.
The staff will schedule each change order for City Council consideration as soon as practicable. The
Change Order request shall include a staff report identifying the pertinent facts surrounding the
change order, the original contract amount, amount of the change order and cumulative change order
amount in dollars and percentage terms.
Contract Documents
Construction Projects A standard contract (see attached contract form) shall be used for all city
public improvement projects. The City Attorney will insert the appropriate information and will review
the necessary supporting contract documents as to form and compliance. The following documents
are typically required as part of the contract process:
1. Request for Proposals
2. Specifications
3. Plans and drawings
4. Bid bond
5. Performance bond
6. Payment bond
7. Insurance provisions;
a) Workers' compensation
b) Liability
c) Owners' protective
Professional Services. A standard contract (see attached contract form) shall be used for
professional services Le., architectural, engineering, construction management etc. The City Attorney
will insert the appropriate information and will review the necessary supporting contract documents as
to form and compliance.
ExceDtions to ComDetitive Biddinq
The following are some of the more common exceptions to the competitive bidding requirements:
1. Contracts less than $.1QQ,OOO.OOu
2. Intergovernmental contracts
3. Noncompetitive supplies and equipment
4. Real estate purchases
5. Professional services including;
a) Architectural
b) Auditing
c) Engineering
d) Legal
t\\I'U~CHASE\Purchasepolicy ItEDLINED:doG-
ll22/9J
{ Deleted: 50
.( Deleted: 11
f Deleted: .
1/22/03
1
e) Group insurance
Procedures for Verifvinq Receiot of Goods or Services for Pa\fment
Each Department Head will review and approve all invoices pertaining to their department purchases.
Upon completion of a purchase order, a purchase order number will be assigned from the Finance
Department. The white copy of the purchase order should be forwarded to the Vendor and the yellow
copy of the purchase order retained by the department for validation with the invoice.
The Vendor should be instructed to send the invoice to the appropriate Department personnel (either
Department Head or Supervisor). Make sure the Vendor is instructed to reference the Purchase
Order Number on the invoice. The Department Head or Supervisor acknowledges the product or
service received by initialing the invoice received from the Vendor. Attach the yellow copy of the
purchase order to the back of the invoice and submit it to the Finance Department for payment
processing.
Statements from Carquest, NAPA, Amoco Oil, Subway, County Market, I.e. on blanket purchase
orders will be reviewed by the Finance Department. Please turn in all invoices IMMEDIA TEL Y upon
receipt.
Purchase Order Comoletion Procedures:
1) Enter the Vendor's name, address, contact person, and phone number.
2) Enter the date the order was placed with the Vendor.
3) Enter the ship to address if different than 4646 Dakota Street SE.
4) Enter the quantity of the item ordered.
5) Enter the description of the item ordered.
6) Enter the unit price of the item ordered.
7) Enter the total cost of the line item ordered (quantity times unit price).
8) Enter the words Sales Tax and the dollar amount for sales tax in the Total column. Tax is
calculated: total dollars times 6.5% (exclude freight and labor charges).
9) Enter shipping and handling charges if applicable.
10) Enter the grand total of all the charges in the Total column.
11) Enter the person's name ordering the product or service.
12) Enter the department accounting number and the accounting object code.
13) The Department Head's signature is required.
14) The City Manager's signature is required if the order is $2,500.00 or above.
15) If the check is to be returned to the person ordering the product or service, enter "Return
check to " and circle the return instructions.
16) If the item ordered is $5,000.00 or over and is an equipment asset, write the word "ASSET"
here. After the invoice is received, an asset number will be assigned to the item and
an asset sticker with the number will be returned to be affixed to the asset.
17) Any equipment that is being traded in is to be identified on the purchase order by
year and model description along with the appropriated fixed asset number which
may be obtained from Finance.
18) Request a purchase order number from the Finance Department before placing the order
with the Vendor.
If a line item is backordered, enter 8/0 next to the line item on the white and yellow copy of
the purchase order. Submit the yellow copy of the purchase order with the invoice to the
Finance Department for payment. Copy the white purchase order on yellow paper and hold
the paperwork for the backordered item to be shipped. When the backordered item is
shipped, attached the invoice with the backordered item to the yellow copied purchase order
and submit the paperwork to the Finance Department for processing the payment.
'1.:IPURCHASEIPurchasepolicy REDLINED.do,,"
Too . _____ __.___ _______ .-----
'/~
.1 Deleted: ~
fD~leted:
. 1/22/03