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HomeMy WebLinkAbout4J - Purchasing Policy Guidelines STAFF AGENDA REPORT AGENDA #: PREPARED BY: SUBJECT: DATE: 4J FRANK BOYLES, CITY MANAGER CONSIDER APPROVAL OF REVISED PURCHASING POLICY GUIDELINES MARCH 17, 1997 BACKGROUND: The City Council directed the staff to prepare written purchasing guidelines. The staff did so and on November 4, 1996, the City Council approved those guidelines. This agenda item requests that the City Council approve updated and improved guidelines. DISCUSSION: Since the City Council adopted the purchasing guidelines on November 4, 1996, we have observed a number of areas in which the guidelines could be improved: The original guidelines did not thorougWy address the issue of confirmation and receipt of materials and services. A new section has been added to the end of the guidelines addressing this important portion of the purchasing policy. Department purchase orders have needed the City Manager's signature for all purchases exceeding $500. This provision was appropriate for a small town. Within our current operations, however, it creates needless delays without significant benefit. ISSUES: The new section on receipt of bids and services is an enhancement to the policy which City's auditors support. This section also represents and enhancement to the overall purchasing process. Increasing the City Manager's signature requirement from $500 to $2,500 does not undermine oversight, and is appropriate considering each department is responsible for proposing and ultimately administering their budgets, some of which exceed $1 million dollars annually. ALTERNATIVES: The Council has the following alternatives: 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER 1. Adopt the Purchasing Policy Guidelines with the proposed revisions. 2. Remove this item from the Consent Agenda for further discussion. RECOMMENDATION: Alternative #1. As the Council is aware, this is the first written set of Purchasing Guidelines the City has had. ACTION REQUIRED: Motion and second as part of the Consent Agenda to approve the revised purchasing guidelines. Attachmen 41317.DOC TO: FROM: SUBJECT: DATE: MEMORANDUM Department Heads & Supervisors Finance Department City Purchasing Policy Revised 3/17/97 PURCHASE POLICY GUIDELINES Minriesota Statutes 471.345 and Prior Lake City Code 1-6-5 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. There are nine 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 $50.00 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 1997 Blanket Purchase Orders are: Battery & Tire Warehouse Beaudette Water Bob's Personal Coffee Bryan Rock BT Office Products C.H. Carpenter Lumber Carlson Hardware Coast to Coast Stores County Market Feed Rite Controls Holiday Station Stores Kraemer & Sons Mail Stop Monnens Supply Mueller & Sons NAP A Parts Dept. Outdoor Power House Prior Lake Aggregates Prior Lake Carquest Prior Prints R&R Carpet Service Radermacher's Shiely Company Snyder Drug Toll Company Vem's Candy Purchases Between $1000 - $5000 Expenditures within this category should be generally preceded by a minimum of two quotes. These may be obtained verbally from vendors and should be observed as a department practice versus absolute requirement. The purpose is to obtain the best price available subject to established quality standards. The purchase order process is the same with the additional requirement that a completed quote form (see attached) is to accompany the purchase order form. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER Purchases Under $2500 Purchases approved within the current year's operating budget shall be authorized by the Department Head via a purchase order. 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 unless reason can be demonstrated otherwise. The process involves the following chronological steps: 1. Complete the Purchase Order as to vendor, date, material description, unit price, total department and account code. 2. Department Head authorizes by signature and sends to Accounting. 3. Purchase Order number assigned by Accounting Department. 4. 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 $50 or less that occur on a daily basis 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. All verbal purchase orders will be in completed form within one week or issuance. Purchases $5000 and Above 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 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 misunderstanding with respect to cost between the vendor and the City. H:IPURCHASE.DOC 2 7! All purchase orders are to be completed before a requisition number is provided unless reason can be demonstrated otherwise. The process involves the following chronological steps: 1. Complete the Purchase Order as to vendor, date, material description, unit price, total department and account code. 2. Department Head authorizes by signature and sends to Accounting. 3. City Manager approval by signature on purchase order. 4. Purchase Order number assigned by Accounting Department. 5. Purchase Order sent by originating department. Purchases Between $5.000 and $15.000 When there is more than one feasible source of supply for an item having a cost of five thousand dollars ($5,000) or more, the City Manager [Department Head] 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 or completed on quote forms (attached) provided by the Finance Department. Purchases of $15.000 or Less 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 fifteen thousand dollars ($15,000). Prior Lake Code 1-6-5 (E). Purchases Between $15.000 - $25,000 Purchase contracts in excess of $15,000 must be approved by the City Council. If the amount of the contract does not exceed $25,000 then the contract may be made by obtaining two or more quotations or by direct negotiations subject to Council approval. Purchases Above $25,000 If the amount of the contract is estimated to exceed $25,000, and funds are appropriated within the current operating budget, 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: 1. Prepare specifications for the product or services desired, including description of selective criteria, if applicable. 2. Prepare a public notice for Prior Lake American. 3. Publish 10 days in advance of bid opening. 4. Analyze bids for conformance with specifications. 5. Prepare bid tabulation. 6. Determine ifbid represents lowest responsible bidder. 7. Prepare a report for the City Council agenda and resolution recommending award of bid. 8. Execute contract with Mayor and City Manager signatures. H:\PURCHASE.DOC 3 The City Manager, City Attorney and Finance Director are authorized to select the method for bidding of purchases over $25,000 so long as the method meets statutory requirements and results in the best value. 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. Also the advertisement must be published at least once in the official newspaper and at least once in the Construction Bulletin. ~ontract Changes A contract approved by the City Council for construction/professional services may only be modified by a change order authorized in advance by the City Council. If additional work becomes necessary due to special circumstances or conditions arise that could not be anticipated it is important that both Staff and the City Council be kept appraised by the contractor/vendor of the situation or request ~ any additional work is actually performed. In circumstances where the public safety or health are in jeopardy, the Staff may approve work in advance of City Council approval subject to approval by the City Manager of such work and notification to the City Council that the work is being conducted under this emergency provision and the reason for expediting the project. If the service contract is under the bid threshold of $25,000, then the accompanying purchase order must be amended and countersigned by the City Manager. Contract Documents The following documents are typically required as part of the contract process: 1. Bid bond 2. Performance bond 3. Payment bond 4. Insurance provisions; a) Workers' compensation b) Liability c) Umbrella d) Owners' protective Exceptions to Competitive Bidding The following are some of the more common exceptions to the competitive bidding requirements: 1. Contracts less than $25,000.00 2. Intergovernmental contracts 3. Noncompetitive supplies and equipment 4. Real estate purchases 5. Professional services including; a) Architectural b) Auditing c) Engineering d) Legal e) Group insurance H:IPURCHASE.DOC 4 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 lTIVOlce. The Vendor should be instructed to send the invoice to the appropriate Department Personnel (either Department Head for 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, Radermacher's Super Value, i.e. on blanket purchase orders will be reviewed by the Finance Department. Please turn in all invoices IMMEDIA TEL Y upon receipt. 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 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 $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) Request a purchase order number from the Finance Department before placing the order with the Vendor. 18) 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. H:\PURCHASE.DOC 5