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Home My WebLink About5L - Purchasing Policy Revision CITY COUNCIL AGENDA REPORT MEETING DATE: January 21,2003 AGENDA #: 5L PREPARED BY: Frank Boyles, City Manager AGENDA ITEM: CONSIDER APPROVAL OF REVISION TO THE CITY PURCHASING POLICY DISCUSSION: History: The City's purchasing program is conducted in accordance with Minnesota Statutes. To supplement the statutory requirements, the City has adopted a Purchasing Policy to establish procedures for purchasing. ISSUES: ALTERNATIVES: RECOMMENDED MOTION: Current Circumstances: Periodically the provisions of the Purchasing Policy are reviewed for conformance to Statute and efficiency in administration. As a result of the most recent Policy review, one change is recommended. Paqe 4, /I Purchases Made Outside of the Cooperative Biddinq Process. Sentences 3, 4 and 9 refer to a "competitive bid committee consisting of the Police Chief, Finance Director and Assistant City Manager." This committee has not been used. Instead, the originating department prepares the specifications and reviews the document with the City Manager and City Attorney. These individuals serve the same purpose as a competitive bid committee. To be accurate, the Purchasing Policy should be changed to delete the reference to a competitive bid committee in sentences 3, 4 and 9. The proposed revision has no substantive impact upon the purchasing process. The change will bring the Policy in conformance with our actual practice. (1) Motion and Second to approve the revisions to the Purchasing Policy as proposed. (2) Take no action or direct staff to provide further information. Alternative (1). 16200 Eagle Creek Ave. S.E.. Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 I :\COUNCIL \AGNRPTS\2003\PURCHASING -POlqg~1.J.9~fPRTUNITY EMPLOYER PURCHASE POLICY GUIDELINES 6/3/02 Mrt~<N<E ~~t ~ s 471.345 and Prior Lake City Code 106.500 set forth the laws regulating purc ' . innesota 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. i;.... ..-..:..,:,:::,:::::::::,:.'~ ','::;}:::::\:;:i,:':;','iii>: ::::-.,':::::,: ',-:':: :;..;:::/': '::'::~:: ',.,:.0:'::-'-"'::::':_, '_.-_X/.:::'~:::'::://:':::::::.:;;:';;;;..;.;;:../;:;:;..:_::<_._'::-:-:><:::..:::-',:',' ........, ,. .".,.. 'L<" " $0 - $100,00 Blanket Purchase Order Department Supervisor Less than $1000 Purchase Order Initiated Department Supervisor $1000 - $2499 P.O./ Quotes. Department Supervisor $2500 - $14,999 P.O. / Quotes. City Manager $15,000 - $49,999 P.O. / Quotes. City Manager/Appropriated $50,000 and Above Bids / Cooperative Agreements City Council * Written quotes or a completed quote form is to be attached where there is more than one feasible source. Purchases above $15.000 not subject to bid requirements must have been authorizeG within the limits established by the department budget. 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 2003 Blanket Purchase Orders are: 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER .-.-..,..-'.------.---------..'...'.'.... ,.... AI's Tru Value Apple Printing Astleford Equipment Bang's Equipment Bryan Rock C.H. Carpenter Lumber Carlson Hardware Co, Carquest Catco Parts & Service County Market Delegard Tool Digger's Prior Lake Polaris Factory Motor Parts Fastenal Filterfresh Finishing Touch Supply Gall's Greenman Technologies Grossman Chevrolet Harold's Locksmith Hawkins Water Treatment Kraemer & Sons Lano Equipment MTI Menards Monnens Supply NAPA Parts NRG Processing New Horizon Novak's Garage Prior Lake Aggregate Prior Lake Rental R&R Carpet Service Savage Tire & Auto Snyder Drug Steve Tupy Tire Terminal Supply Co, Toll Welding TruGreen-Chemlawn Vermeer of MN William Mueller & Sons Wolf Motors Zahl Petroleum C:\Documems aud Seniugs\KellyM\Local Senings\Temporary Im2net Files\OLKJ87\Purchasepolicy.doc 6/3/02 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. Receipt/invoice of purchase. 2. Receipt/invoice must indicate description of purchase (parts # is not acceptable). 3. Receipt/invoice must indicate dollar amount. 4, Receipt/invoice must be signed. 5. Receipt/invoice 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 $2500 - $15,000 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 of $2500 or greater must C:IDocuments and Settings<KellyMlLocal SettingslTemporary Internet Files:PLKI871Purchasepolicy.doc 6/3/02 ......----.--..-........-..-1....--.....--........ 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 amount verification and avoid any misunderstandirg 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. Purchases Between $15.000 and $50.000 When there is more than one feasible source of supply for an item having a cost of fifteen thousand dollars ($15,000) 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 fifty thousand dollars ($50,000). Prior Lake Code 106.500 (5), Purchases above $15,000 not subject to bid requirements must have been authorized within the limits established by the department budget or pre-approved by the City Council. Purchases Exceeding $50.000 There are three processes available that would satisfy statutory requirements for purchases that are above $50,000.00, 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 organizetions 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, C:IDocuments and SetlingslKellyMILocal SetlingslTemporary Internet Files4>LKI 871Purchasepolicy.doc 6/3/02 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 meeing. II. Purchases Made Outside of the Cooperative Bidding Process If the amount of the contract is estimated to exceed $50,000, and funds are appropriated within 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.G.ityAttQn::u~Y!'lD.Q.Qi!Y_Me.IJ.eg!'!rJQLC:;_Q-'1!mli:loJ 4, Purchasing department modifiesthespedficatjonsa<~ppri:lP[i~f~:n n --. -- ---- 5. Solicit Council approval of plans and specifications;nreciuei;f--for'proposais--'arid 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 Ptv rv1ar~(lqer_ t()geth13r IJvith. the. .draft. agElf)da rElflo.rt_ (If)d_. recommendation. 1 O. c::itYMal1<:lg€l.LeOcjc,::ity-'l.ttQrnElyprovid~ comments for inclusion in agenda report, 11. 'citi .toun6li 'considers -the' recommen-datioii 'a-rid - acts 'LIpon' 'the - iiurd18se.' H' the- 'purd-iase- 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 $15,000 and $50,000. Purchases Exceeding $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 Changes 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 modificatim does not exceed 25% of the original contract amount in the aggregate and the item which is increased or decreased was part C:IDocurnents and SettingslKellyMILocal SettingslTemporary Internet Files5lLKlS7IPurchasepolicy.doc 6/3/02 Deleted: Competnive Bid Committee consisting of Police Chief, Finance Oirector and Assistant City Manager. Committee sends draft specffications to potential bidders to detennine if they can bid and if not, what modifications could be made. Deleted: requested by the Compet~ive Bid Committee [ Deleted: Compet~ive Bid Committee J Deleted: Committee Deleted: s --,-.-----"---....,,.-..-...-... --.. .--...--......-."1------------ 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: 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 i.e., 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. Exceptions to Competitive Bidding The following are some of the more common exceptions to the competitive bidding requirements: 1. Contracts less than $50,000.00 2. Intergovernmental contracts C:\Documents and Settings\KellyM\Local Settings\Temporary Internet Files(9LKI87\Purchasepolicy.doc 613/02 3. Noncompetitive supplies and equipment 4. Real estate purchases 5. Professional services including; a) Architectural b) Auditing c) Engineering d) Legal e) Group insurance Procedures for Verifying Receipt of Goods or Services for Payment 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 Completion 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 16200 Eagle Creek Avenue 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 grarid 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 retum instructions. 16) If the item ordered is $500.00 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. C:<Oocuments and SettingslKellyMILocal SettingslTemporary Internet Files"pLKI 871Purchasepolicy.doc 6/3102 .~._~-~--~~ .~~- --T~"-'-'--'----'""_._--- 18) Request a purchase order number from the Finance Department before placing the order with the Vendor. If a line item is backordered, enter B/O 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. C:\Documeots aod SettingslKellyM\Local SettingslTemporary lotemet FilesglLKl87lPurchasepolicy.doc 6/3/02