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2007-073 Purchasing Policies with changesRESOLUTION 2007 73 • A RESOLUTION OF THE VILLAGE COUNCIL OF THE VILLAGE OF NORTH PALM BEACH, FLORIDA, REVISING THE VILLAGE'S PURCHASING PROCEDURES AS SET FORTH IN THE VILLAGE OF NORTH PALM BEACH ACCOUNTING POLICIES AND PROCEDURES MANUAL FOR INTERNAL CONTROLS; PROVIDING FOR CONFLICTS; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the Village retained the firm of Caler, Donten, Levine, Druker, Porter & Veil, P.A. ("Caler Donten") to provide consulting services and to review and evaluate the Village's purchasing and cash disbursement policies; and WHEREAS, in formally adopting the Caler Donten report, the Village Council concluded that it should be utilized by the Village Administration, the Village Audit Committee and the Village Council as a guide to strengthen internal controls and make the Village purchasing system more effective and efficient; and WHEREAS, in accordance with the Village Council's direction, the Village Administration is proposing revisions to the Village's Purchasing Procedures as set forth in the Village of North Palm Beach Policies and Procedures Manual for Internal Controls; and WHEREAS, the Village Council determines that the adoption of such revisions is in the best interests ofthe Village and its residents. • NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE COUNCIL OF NORTH PALM BEACH, FLORIDA as follows: Section 1. The foregoing recitals aze hereby ratified and aze incorporated herein by reference. Section 2. The Village Council hereby adopts the revisions to the Village's Purchasing Procedures as set forth in Exhibit "A" attached hereto and incorporated herein by reference. These revisions shall be incorporated into the Village of North Palm Beach Accounting and Procedures Manual for Internal Controls dated June 2002, as subsequently amended. Section 3. All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict. Section 3. This Resolution shall take effect immediately upon adoption. PASSED AND ADOPTED THIS 12th DAY OF JULY, 2007. (Village Seal)~~., Qi ~C% ~ ~ . , . MAY • ATTEST: ~°'~ VILLAGE CLERK Purchasing Objective The primary objective of the Village’s purchasing operation is to maximize the value of the dollar spent. All Village departments are responsible for accomplishing this objective by planning for future purchase needs and making them in an economical manner. Responsibilities of Finance Department ? Maintain an up to date vendor list ? Process purchase requisitions ? Prepare and issue purchase orders ? Pay vendor invoices Responsibilities of Village Clerk ? Maintaining bid files Responsibilities of Operating Department ? Obtain prices on comparable items ? Search for new sources of goods and services and provide that these vendor names to the Finance Department ? Provide complete information on items to be purchased on the purchase requisitions and reference the budget line item description. ? Provide appropriate documentation with purchase requisitions as required. ? Plan for purchases to minimize emergency purchases ? Prepare technical specifications ? Determine if sufficient funds are available in the budgeted line item. ? Attempt to use the Finance Department’s vendor list as a minimum for all quote requirements Responsibilities of Village Manager ? Advertise for bids ? Take formal bids 1 Purchasing Policy Determining Purchasing Methods a) All purchases having an estimated cost in excess of $10,000 (Resolution 50-2001) that are budgeted to exceed $10,000 on an annual basis: 1. Must be formally advertised in a newspaper of general circulation with the advertisement being no less than fourteen (14) days prior to the opening of bids. 2. Must be awarded on a sealed bid basis by vote of Village Council. 3. The Vendors’ list will be used as a minimum notification list of available vendors for bidding purposes. b.All purchased having an estimated cost between $1,001 and $10,001 (resolution 50- 2001): 1.Must be made by written price quotation (minimum three (3) quotations must be obtained) 2.Must be budgeted items 3.Must be authorized by Village Manager c.b. All purchases having an estimated cost between $5011,000 and $1,00010,000: 1. Require three (3) quotations. A written quote from each vendor is to be attached to the requisition. Where a written quote is not available, a memorandum from the Department Head documenting the three (3) verbal quotes is required. No hand-written quotes will be accepted. 2. Must be budgeted items 3. Shall be authorized by Department Head, Finance Director, orand Village Manager d.c. Purchasing Purchases having an estimated cost of up to $5001,000, unless otherwise described in this manual: 1. Do not require bids or three (3) quotes; Department heads are encouraged to obtain the most cost effective price. 2. Must be budgeted items 3. Shall be authorized by Department Heads e.d. Exceptions – In certain instances exceptions to the above may exist. Purchases may be accomplished: 1. Through the use of the emergency purchase provisions as provided for in the Emergency Purchases section of this manual. 2. When annual contracts exist, i.e. gas, oil, tires, office supplies, etc. 3. When requirements imposed by federal, state, or county grants provide different regulations. 2 4. When the Village Manager deems it appropriate to use procedures of more formality than set out above. 5. When the Village Council waives the purchasing rules and regulations. 6. The Village Manager shall also comply with Resolution No. 44-98 of the Village when authorizing purchases that involved written contracts. (Resolution 51-98) Initiating a purchase Purchase Requisition A purchase requisition must be completed and submitted to the Finance Department with the appropriate documentation attached. Where equipment is covered by maintenance contracts, requests for service may be made directly by the respective department. Copies of all approved maintenance agreements will be submitted to the Finance Department at the beginning of each fiscal year. An annual purchase order that shall not exceed one year will be issued, if required by the vendor. Requisition Preparation Procedure to process regular requisitions: a. Print each requisition in duplicate and give Each requisition should provide the following: 1. Sequential requisition number 2. Department account number 3. Date of requisition 4. Suggested vendor name and address 5. Village Delivery location 6. Quantity 7. A Ccomplete, detailed description of the item(s) to be purchased along with a budget line reference.that and includes the purpose of items to be purchased. Please , and reference budgeted line item description. 8. Estimated net cost of line items and goods and services 9. Estimated cost of shipping and handling 10. Signature of department head which indicates department head’s approval of purchase. b. When necessary, bid documentation, i.e., telephone bids, requests for quotations, etc. should be attached to the purchase requisition. c. For requisitions over $1,000, purchase requisition originals are to be The original is sent d the originalt to the Finance Department. or to the Village Manager. (for over $1,000) d. Second copy is kept in the requesting department’s file. e. Upon receiving the requisition, Finance will determine the availability of funds in the department’s account. If funds are available, preparation and processing of 3 the purchase order will be completed and forwarded to the Village Manager for final authorization.. f. Requisitions over $10,000 will be subject to the bidding process. Upon award of bid by the Village Council, the Finance Department will prepare and issue a purchase order. Once the Village Council awards the bid to a vendor, the operating department must prepare and forward to the Finance Department the purchase order requisition along with a copy of the bid documentation and the adopted resolution. g. The Village’s purchasing policy allows management to “piggyback” on other state and local government contracts for labor and materials. If the “piggyback” provision is to be utilized the operating department will obtain a verbal quote from a secondary qualified vendor to verify the “fair market” value of the item or services sought. If this quote is significantly lower, staff will go through the normal purchasing/bidding procedures. The verbal quote verification procedure will be indicated as part of the back-up material for the purchase. Purchasing Procedures, Bids, Contracts, Vendor Selection, Etc. Formal Bidding Formal bids are required for purchases in excess of $10,000. Writing Specification Upon submitting a request for formal bidding, the department should also transmit desired specifications to be included as a part of the bidding process. Care should be taken to design specifications so that they are not so narrow as to limit competition unnecessarily. Department heads have the responsibility for complying with this guideline. Identifying Suppliers Operating departments are responsible for maintaining a comprehensive, updated list of suppliers of various products frequently purchased by that department. It is the Village’s policy to award to the lowest qualified bidder offering merchandise conforming to pre- defined specifications. Sealed Bid Opening All sealed bids are to be opened at the exact time, date, and place specified in the bid package. A bid package contains: (1) notice to bidders; (2) complete bid specifications and (3) contract documents, if appropriate. All bids are to be opened publicly with tabulation being made available to all vendors participating. Formal bids are to be checked for proper submission of any required bid deposits, bonds, etc. All sealed bids will be opened by a bid board consisting of the Village Manager, the Department Head 4 concerned, and the Village Clerk. After evaluation, a recommendation will be made by the Village Manager for transmittal to the Village Council. Sole Source Items “Sole source purchases are the acquisition of goods and services that for all practical purposes can only be obtained from a single vendor, usually because of limited technology, technological compatibility with existing systems, goods or services already in use by the Village or other unique qualities of the goods or services that preclude a competitor’s price comparison.” All sole source purchases will be documented by a memo from a Department Head justifying why the purchase is sole source. Sole sources items must be designated as such when requisitions or specifications are submitted. Every reasonable effort must be made to locate competitive suppliers. Only the Village Manager may certify an item as sole source. Approval of sole source purchases over $10,000 is to be made by the Village Council. Contracts, Retainage, Change Orders, & Payment a. The Village Manager is authorized to sign contracts on behalf of the Village that involve expenditures for goods and services that are line items within the Village budget and do not exceed ten thousand ($10,000). Prior to execution of contracts, the Village Manager shall first comply with the purchasing regulations adopted by the Village Council and have the contracts reviewed by the Village Attorney for legal sufficiency (Resolution 44-98). b. Contracts for over $10,000 must be approved by the Village Council. c. The annual contracts awarded by Palm Beach County, the State of Florida and the Palm Beach County Cooperative Purchasing Council, and other governmental agencies for labor and materials are accepted by the Village in accordance with their terms (Resolution 69-99). d. The American Institute of Architecture, AIA Document G702-1992, Application and Certificate for Payment, is the form that is completed by the Contractor and Certified by the Architect/Engineer as part of their payment request. This form shows the Original Contract amount then the progression of payments previously paid, retainage, current request and balance of contract to complete the Project. The percentage of Retainage is specified in the Agreement that is executed by the Village and the Contractor. A standard of ten percent (10%) will be used unless adjusted by the Mayor and Council. Change Orders A Change order is a written instrument prepared by the Contractor and Certified by the Architect/Engineer and then approved by the Village stating their agreement upon the following: 5 a. Actual change in work required b. The dollar amount of the adjustment and its effect on the Contract’s Total Sum c. The extent of the adjustment and how it will affect the Contract’s time frame. d. If a lump sum payment is necessary, the request must be properly itemized and supported by sufficient substantiating data to permit evaluation. All parties involved must mutually accept the adjustment(s) as presented. e. Unit prices stated in the Contract Documents or subsequently agreed upon must be mutually acceptable to all parties in involved f. If costs are to be determined, all parties must agree upon a mutually acceptable fixed or percentage fee. Change Order Process a. All proposed change orders must be approved by the Village Engineer (if involved in the project), the Department Head overseeing the project, and the Village Manager. b. The Village Manager has the authority to approve change orders under $10,000 that are within the original scope of the project and that do not exceed the original budget line item for the project; however, the Village Council will be notified of any such change orders for their approval and ratification at the next scheduled Council Meeting. c. All change orders in excess of $10,000 must be brought to the Village Council for approval. d. If exigent circumstances exist requiring immediate action and a delay would adversely impede the project operationally, the Village Manager can with written documentation, authorize a change order in excess of the $10,000. The Village Manager will be responsible for immediately reporting this Change Order at the next scheduled Council Meeting for ratification Contract Payment Process: 1. Certificates for Payment a. The Architect/Engineer will, within seven days after receipt of the Contractor’s Application for Payment, either issue to The Village a Certificate for Payment, with a copy to the Contractor, or notify the Contractor and The Village in writing of the Architect/Engineer’s reasons for withholding certification in whole or in part. b. The issuance of a Certificate for Payment will constitute a representation by the Architect/Engineer to the Owner that the work has progressed to the point indicated and that the quality of the Work is in accordance with the Contract Documents. It will further constitute a representation that the Contractor is entitled to payment in the amount certified. 6 2. Final Completion & Final Payment a. Upon receipt of written notice that the work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Architect/Engineer will promptly make such inspection and, when the Architect/Engineer finds the work acceptable under the Contract Documents And the Contract fully performed, the Architect/Engineer will promptly issue a final Certificate for Payment. b. Neither final payment nor any remaining retained percentage shall become due until the Contractor submits to the Architect/Engineer: 1. an affidavit that payrolls, bills for materials and equipment and other indebtedness connected with the work have been paid or otherwise satisfied, 2. a certificate evidencing that insurance required by the Contract Documents to remain in force after final payment is currently in effect and will not be cancelled or allowed to expire until at least 30 days prior written notice has been given to the Village, 3. a written statement that the Contractor knows of no substantial reason that the insurance will not be renewable to cover the period required by the Contract Documents, 4. consent of surety, if any, to final payment, 5. if required by the Village, other data establishing payment or satisfaction of obligations. c. Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. d. The Certificate of Completion and the Application for Final Payment forms must be completed. The Application for Final Payment requests the release of the retainage and requires the following signatures: 1. For Projects $10,000 or less, the Director managing the project and the Village Manager will sign off upon completion of the project. 7 2. Projects from $10,001 to $100,000 – The Director managing the project along with the Director of Community Development and the Village Manager will sign-off upon completion of the project. 3. Projects exceeding $100,000 requires the same signature authority as item #2 and will be forwarded to the Mayor and Council for final closeout and release of contractual retainage. Purchase Order Use of Purchase Orders A purchase order should be used for the purchase of a single item over $1,000 that is not purchased on a regular basis. This would include all purchases not covered by a blanket purchase order. All purchases that are budgeted to exceed $10,000 on an annual basis surpass the Village’s bid threshold and will be bid prior to the beginning of the fiscal year. For all regular purchases of more than $1,000, the purchase order will be used. Exceptions are outlined in the Purchase Orders section,s in the Confirming Purchase Orders, as well as in the Emergency Purchases and Miscellaneous sections (Resolution 18-96). Procedure for Issuing a Purchase Order a. All purchase orders will be issued by the Finance Department b. All purchase orders will be sequentially numbered. c. The purchase order is prepared in triplicate d. The purchase order is printed giving the following information: 1. Purchase order number 2. Vendor code number 3. Vendor name 4. Vendor address 5. Vendor contact person 6. Vendor telephone number 7. Vendor fax number 8. Department account number 9. Requisition number 10. Date of purchase order 11. Required delivery date 12. Terms 13. FOB point 14. Destination shipping point 15. Quantity ordered 16. Vendor proprietary stock number (if any) 8 17. Generic description of goods or services ordered 18. Unit price 19. Extension 20. Net total of goods and services ordered 21. Allowable shipping charge 22. A box checking an original or confirming purchase order 23. Signature of responsible Village official How Purchase Orders are Processed a. The original copy is delivered directly to the vendor b. The second copy is retained by the Finance Department for account encumbrance and is attached to the requisition original. c. The third copy is sent to the Department Head or the requisitioning department. Cancellation of a Purchase Order All cancellations of orders must be made by forwarding to the Finance Department the receiving copy of the purchase order with the word “VOID” printed across the face of said copy. The Department Head should sign and date all voided purchase orders, as well as provide a brief reason for the void. Confirming Purchase Orders Maintenance Agreements, equipment repairs, maintenance materials and supplies, or other items purchased at the time of need may be handled as follows: a. When a department needs a purchase order number for an item in this category the Finance Department should be contacted. The Finance Department will assign a purchase order number to that item and record the vendor’s name, purchase order number, approximate cost and account number. b. The Finance Department will process the purchase order in the normal fashion, except that the “CONFIRMING” box on the purchase order will be checked. The name of the contact person at the vendor with whom the order was placed, and the date and time the order was placed. will be written. c. “CONFIRMING” orders will be kept to a minimum and used only when it is not reasonable to use the normal purchasing method. Expediting Orders Once the Finance Department has issued a purchase order, no follow-up work is done on the order by Finance. It will be the responsibility of the operating department to expedite orders. 9 Back Orders andof Partial Payments (Open Purchase Orders) When several items are ordered, the supplier may deliver only a portion of the quantity requested. He may then advise you that the remainder of the order has been back ordered. The Department Head should retain the copy of the purchase order until all items are delivered. Should the vendor invoice the Village for the partial order delivered, the following partial payment procedures should be followed: can be implemented: a. When the invoice is received, the department head should forward the invoice to the Finance Department with his or her approval of the partial payment. Notations should be made on the invoice that the order is “INCOMPLETE” and the purchase order number circleds, or noted if it is not mentioned on the invoice. The Finance Department will use this as authority for partial payment. Documentation must be sent to the Finance Department indicating which items have been received before the Finance Department makes the payment on such invoice. b. The department copy of the purchase order remains in the department until the entire order is filled, invoiced or balanced canceled. Blanket Purchase Orders Blanket purchase orders can be requested from the Finance Department for small, routine daily purchases for each vendor that the department intendsed to use frequently during the year. Examples would be office supplies, hardware store purchases, etc. The blanket purchase order is not to be used for single or large purchases. The blanket purchase order must be authorized by the Department Head, and is limited for each purchase up to $1,0002,500 as authorized by the Department head for each vendor., with no single purchase to exceed $1,000. Split Purchases (Pyramiding) a. Split purchases, or pyramiding is defined as issuing more than one purchase order on the same product. (With the intent of circumventing these regulations and/or budget limitations) within an unreasonably short time period such that the totals of the purchase orders equal an amount greater than that authorized by these regulations. Split purchases are prohibited b. . Emergency Purchases General Policy True emergencies do occur as a resultingt in the purchase of parts, supplies, and labor needed to repair equipment and facilities that are needed necessary to provide services for 10 the health, welfare and safety of the public. Anticipating needs in advance, whenever possible will hold emergency purchases to a minimum and allow the use of standard procedures. Procedure a. Emergency purchases between $0 and $1,000, mark invoice “EMERGENCY PURCHASE”. The invoice must be submitted to and approved by the Department Head, subject to confirmation by the Village Manager. b. Emergency purchases of more than $1,000 and up to $10,000, mark invoice “EMERGENCY PURCHASE”, and contact the Village Manager for approval, subject to confirmation by the Village Council. (Resolution 50-2001) c. Emergency purchase over $10,000 are not to be made without the approval of the Village Council (Resolution 50-2001) Purchasing Cards Recognizing the advent of automated internet supply vendors and the occasional time sensitive procurements, the utilization of a Village purchasing card is both necessary and required. The Finance Department shall maintain one purchasing card to be utilized in select cases in accordance with the existing purchasing regulations. Any department needing to use the purchasing card shall request in writing, to the Finance Director, the intended use of the card, the amount and the account number(s) to be charged. All requests must be approved by the department head prior to sending it to the Finance Department. If the request meets all applicable purchasing regulations and the departmental funds are available, the Finance department will obligate the Village for the purchase by use of the Village’s purchasing card. The department making the purchasing request shall be responsible for providing invoices (receipts) or other acceptable documentation to the Finance Department immediately upon receipt. All invoices (receipts) shall be initialed with the account number(s) to be charged. Sales Tax Exemption Village purchases are exempt from Florida sales tax. When making purchases, the vendor will be provided with the sales tax exemption number. Capitalization The capitalization threshold for capital assets is $2,500. Upon receipt of the item(s), the Department Head shall complete an Asset Worksheet and send the worksheet to the Finance Department. 11