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1c. Approval of Amendment to the Purchasing Policy CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone: 952.227.1100 Fax: 952.227.1110 Building Inspections Phone 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax: 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone: 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax: 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax 952.227.1110 Web Site www.ci.chanhassen.mn.us 1~ ...- MEMORANDUM TO: Mayor & City Council Members FROM: Ok. a~, Greg Sticha, Finance Director DA TE: July 14, 2008 SUBJ: Approve Amendments to the Purchasing Policies & Procedures Manual PROPOSED MOTION "Staff recommends that the City Council approve the amended purchasing policies and procedures manual." Approval of this item requires a simple majority vote of those City Council members present. BACKGROUND At the June 23rd City Council work session, staff and council discussed amending the city's purchasing policies and procedures manual to follow the new state bidding requirement legislation. After discussion, council was in favor of the recommended changes with the addition of the following statement: "All purchases must be approved as part of the annual budgeting process or within the CIP." RECOMMENDA TION Staff is recommending that the City Council adopt the amended purchasing policies and procedures manual. ATTACHMENT 1. Background memo from June 23, 2008 Work Session. 2. Amended Purchasing Policies & Procedures Manual. The City of Chanhassen · A growing community with clean lakes, quality schools, a charming downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play. F:\GregS\Council\2008\7-14 amend purcasing policy memo. doc x CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone: 952.227.1100 Fax: 952.227.1110 Building Inspections Phone: 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax: 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone: 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax: 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us MEMORANDUM TO: Mayor & City Council Members FROM: Greg Sticha, Finance Director DA TE: June 23, 2008 SUBJ: Revision of Purchasing Policies & Procedures Manual BACKGROUND In April of 2008, the state legislature approved several revisions to statutes concerning bidding requirements. The revisions include raising the statutory limit of requiring sealed bids for non-professional service purchases from $50,000 to $100,000. In addition, the statutes changed the requirements for purchases between $25,000 and $100,000 and purchases below $25,000. The city's current purchasing policies and procedures manual follow the old state requirements, and the staff is requesting revisions to follow the new statutes. A summation of the new requirements is as follows: 1. Purchases greater than $100,000 need to follow the sealed bid process. 2. Purchases between $25,000 and $100,000 need to have two written quotes and do not need to be advertised. The quotes must be kept on file for a minimum of one year. 3. Purchases less than $25,000 can be made either with two written quotes or in negotiation on the open market at the discretion of the governing body. Attached is a copy of the purchasing policies and procedures manual with the requested changes to follow the statutory requirements. In addition, staff is requesting raising the limit for requiring RFP's (Request for Proposals) on professional services from $15,000 on an annual basis to $25,000. ATTACHMENT 1. Excerpt from the Purchasing Policies & Procedures Manual The City of Chanhassen · A growing community with clean lakes, quality schools, a charming downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play. F:\GregS\Council\2008\revise policies and procedures manual 6-23.doc Purchasing Policy City of Chanhassen, Minnesota Adopted on February 10, 2003 Amended on July 14, 2003 June 26, 2006 July 14, 2008 Section 1. Purchasing Guidelines 1.1 Goals and Objectives This purchasing manual was created to: · Clarify and reconcile the sometimes confusing requirements of state purchasing law, departmental procedures, and the finance department processes. · Provide a comprehensive resource book for staff to be effective and efficient when making purchases. · Standardize purchasing and payment methods to expedite the purchasing process. The standards in this manual are minimum standards to ensure fiscal responsibility. Departments may set more restrictive procedures to meet their own budgetary accountability. 1.2 ADA Compliance The City of Chanhassen is subject to the provisions of the Americans with Disabilities Act (ADA). The Chanhassen City Council adopted an ADA compliance plan which outlines how the city complies with the Act. In general, the city will consider the needs of people with disabilities as it purchases equipment and configures work and public areas. Section 1. Purchasing Guidelines 1.3 Quick Reference Guide Value of Purchase Quotations Needed Payment Request Approvals Needed Prior Options to Purchasing Less than $100 None Petty Cash Department Yes Credit Card Finance No Check Request City Manager No City Council No $100-$4,999 Departmental Discretion Credit Card Department Yes Check Request Finance No Purchase Order City Manager No City Council No $5,000-$10,000 Two Written Quotes or Check Request Department Yes RFP's Purchase Order Finance No City Manager No City Council No $10,000-$24,999 Two Written Quotes or Check Request Department Yes RFP's Purchase Order Finance No City Manager Yes City Council No $25,000-$99,999 Two Written Quotes or Check Request Department Yes RFP's Purchase Order Finance Yes City Manager Yes City Council Yes Greater than $100,000 Sealed Bids Check Request Department Yes Purchase Order Finance Yes City Manager Yes City Council Yes Notes: If a cooperative purchasing agreement is in place, quotations are not needed. All purchases must be approved as part of the annual budgeting process or within the CIP. RFP's are required for contracting services in excess of $25,000 on an annual basis except from the consultant pool (see RFP section of this document). The city manager may delegate authority for approval of agreements less than $25,000 (see Agreement Processing section of this document). Purchases between $10,000 and $25,000 have to be approved by the City Manager. The city council has pre-approved payment for utility accounts and payroll transfers that occur in the normal course of business even though they may exceed $25,000. These are contractual accounts for services that are approved as part of the budget process. The vendors that fall under this situation include Minnegasco, Northern States Power, Metropolitan Council Environmental Services, United States Treasury, State of Minnesota, Medica, PERA, and St. Paul Companies and other similar companies. Any payments to these vendors that are outside the normal course of business will be presented to the City Council for individual approval. Section 2. Purchasing Practices 2.1 Ethics I Relations with Vendors The City of Chanhassen holds its employees to the highest ethical standards. Purchases shall be conducted so they foster public confidence in the integrity of the city's procurement system, and open and free competition among prospective suppliers. In keeping with this value, employees should avoid the following practices when making purchases on behalf of the city: Circumventing competitive bidding requirements. Examples of this include: · Splitting purchases so that they can be made through several small purchases. · Using the emergency procedure process when no true emergency exists. · Using a 'sole source' exemption when competition is available. Denying one or more vendors the opportunity to bid on a contract Examples of this include: · Using unnecessarily restrictive specifications. · Pre-qualifying bidders on a discriminatory basis. · Removing companies from a bidders list without just cause. · Requiring unnecessarily high bonding. Giving favored vendors an unfair advantage. Example of this include: · Providing vendors with information regarding their competition's offers in advance of a bid opening. · Making information available to favored vendors and not to others. · Giving un-favored vendors inaccurate or misleading information. Accepting gifts from vendors. · Minnesota Statutes S471.895 prohibits government employees from receiving gifts except where they are included as part of the cost of a product, good, or service provided (such as a meal provided as part of a conference). Section 2. Purchasing Practices 2.2 Recycled Content Environmentally preferable products are goods and services that have a lesser or reduced effect on human health and the environment when compared with other goods and services that serve the same purpose. The following is an overview of items that should be considered prior to making a purchase. Details relating to the items can be found at the Solid Waste Management Coordinating Board web site at www.swmcb.org. Office Products - General · Erasable boards - alternative to paper flip charts · Self-stick fax addressing labels - alternative to full-sized fax cover sheets · Electronic software presentations - alternative to transparencies · Solar-powered calculators and other devices - eliminates the need for batteries · Refillable pens, pencils, and tape dispensers - eliminates waste · Reuse file folders and binders - applying new labels extends their usefulness · E-mail - alternative to paper memorandums · Double-sided copies - reduces paper waste · Reusable kitchen dishware - reduces waste · Purchase products in reusable, refillable, or returnable containers -containers may be sent back to the vendor for reuse Copy Paper and Envelopes · Recycled content - when possible, purchase 100% post-consumer paper · Chlorine-free paper - buying chlorine-free paper reduces pollution. Choose paper labeled as 'Processed Chlorine-Free" (PCF) · White and pastel paper - fluorescent colors make copy paper harder to recycle Purchase white and pastel-colored copy paper - dark colors, plastic windows, and padding make envelopes harder to recycle Printing Services · Low volatile organic compounds - choose a printer that uses low-vac water- based or agri-based inks and press chemicals · Inks - avoid inks containing heavy metals such as barium, copper! and zinc. Colors to avoid include fluorescent colors, warm red, and metallics · Glue, Coatings, and Foil Stamping - use glueless bindings and uncoated paper when possible. Avoid foil stamping and heavy ink coverage Office Machines Copiers - save paper with copiers that feature automatic duplexing and multi-page printing. Purchase remanufactured copiers and models that can use remanufactured toner cartridges · Computers and Monitors - choose models that can be easily upgraded · Printers - when possible, choose printers with duplex units to save paper. Look for models that are certified as star compliant (can cut energy use by more than 65%) · Printer Toner Cartridges - purchase remanufactured toner cartridges from suppliers that will reuse spent cartridges Vehicles · Motor Oil - purchase re-refined oil when possible · Antifreeze - purchase extended life antifreeze that is designed to last five years/150,000 miles or longer · Fuel - the use of 85% ethanol blended fuels (E85) reduces carbon monoxide and ozone-producing emissions Plastic Lumber and Treated Wood · Plastic Lumber - alternative to chemically treated wood · Treated Wood - purchase only AGO treated wood Office Cleaners · Reusable, Returnable Packaging - purchase cleaners in concentrates · Plastic Waste Bags - purchase bags that are made from recycled materials Paint · Latex Paint - purchase latex paint rather than oil-based paint. Paint should be 10% to 100% post-consumer content Carpet · Purchase recycled rubber-backed carpet tiles that can be replaced as they wear Office Furniture and Panels · Remanufactured Furniture - Purchase remanufactured furniture when possible. When purchasing new furniture, look for recycled content including metal, PVC and other plastics, pressboard, and fabric Section 3. Authorization The City of Chanhassen has a decentralized purchasing program where individual departments are responsible for making their own purchases. There are a few exceptions including the supplies maintained in the office supply closet, paper and stationery products, and modular furniture and chairs. The front desk receptionists will assist staff members who need help with research or purchase of items in cases where staff are not familiar with particular products. Payment Authorization Process 1 . Determine the need for commodities and services. 2. Research the cost of the purchase and determine proper purchasing alternative. 3. Determine the appropriate account coding and whether there is sufficient funds available in that budget line item. 4. Forward request to department director or designee for approval. If purchase exceeds $5,000 and is less than $15,000 approval is needed by City Manager. 5. Department director forwards request for payment with invoice to the Finance Department for approval and input into financial accounting system. 6. Finance produces check register for approval by the city manager or his/her designee and review by city council. 7. Payment is made by the finance department. Section 4. Purchasing Alternatives 4.1 Sealed Bids · A formal sealed bid procedure is required for all purchases in excess of $50,000 except professional services. · A published notice of bid is required in the official city newspaper at least seven days in advance of bid opening. The published notice must state where the plans and specifications can be obtained by bidders and specifically, where the bid opening will be held. The notice may also be published on the city's official web site; however, this publication is in addition to the official newspaper publication. · All bid openings are to be administered by originating department. · The preparation of all specifications are to be the responsibility of the originating department. · Required authorization for plans and specifications is the responsibility of the originating department. · The city council must formally approve the bid contract. · The originating department then files the contract with the administration department. 4.2 State, County and Other Cooperative Purchasing Contracts State Cooperative Purchasing Contracts - The City of Chanhassen participates in the State of Minnesota Cooperative Purchasing Venture (CPV). This enables participants to buy goods and services at a reduced cost under the terms of contracts already negotiated by the State of Minnesota. · The finance department has access to the releases and listings of products/services that can be purchased on state contract. · If it is determined that a product/service is on a state contract vendors should be told that the purchase will be made using that contract. When completing the purchasing paperwork, note that the purchase is per state contract and indicate the contract number. 4.3 Quotes If a purchase is estimated to exceed $10,000 but not to exceed $50,000, the purchase may be made either by sealed bids or by direct negotiation based upon quotations. If a purchase is made in this range, staff members are required to obtain at least two written quotes. These quotes should be in writing. If the quotes are not written, the requestor who received the verbal quote must document the quote in writing. All such quotes must be forwarded to the finance department with the purchasing documents. 4.4 Emergency Emergency situations may arise where the normal purchasing process cannot be followed for the procurement of goods and services. An emergency must be a situation arising suddenly and unexpectedly which requires speedy action essential to health, safety, and welfare of the community, and not just an inconvenience. 4.5 Request for Proposals (RFP) RFPs may be used to solicit proposals for professional services. Typical information to address in RFPs includes: · Background and scope of the project · The project's budget to ensure that the proposals stay within that range. · Proposal requirements should include adequate information to allow for propert review and evaluation including: · Description of firm and qualifications, including any specialized experience related to the project. · A list of similar projects the firm has completed. · Project timetables including: estimate of hours, breakdown of hours by phase, and the city's expectation for a completion date. · Designation of a firm principal who will be in charge of the project. · Resumes for all staff who will work on the project. · Statement that either no subcontractors are allowed or that all subcontractors will be identified and are subject to the city's approval. · Estimate of cost to provide the service, outline of fee schedule and payment schedule. · Description of city's selection process. · City's evaluation criteria, which typically may include: · Quality and thoroughness of the proposal. · Similar past experience and/or expertise. · References · Cost estimate · The following statement must be included: The city reserves the right to reject any and all proposals, waive all technicalities and accept any proposal deemed to be in the city's best interest. · Submittal deadline: date, time, project name, and addressee. · Statement: "Proposers are solely responsible for delivery of their proposals to the city before the deadline. Any proposal received after the deadline will not be considered and will be returned." · Information about where questions should be directed. Note: Staff should make sure that all proposers are given the same information. Attach a copy of the agreement proposed to be used for the project, including the city's insurance certificate. The agreement includes provisions to which the firm must agree, so it is important that they see the agreement up front. It is suggested that the RFP be submitted to the city attorney for review prior to distribution. 4.6 leases/Purchases All lease agreements need approval through the finance department and legal counsel prior to initiating a lease. 4.7 On-Line Purchases The following guidelines are recommended for purchasing products over the Internet: · Only purchase from vendors that use secure servers for e-commerce. Most sites will have a disclaimer, but some do not have the disclaimer language. If in doubt, either send an e-mail to the vendor or call them. · Ask vendors if they have an 'Extranet" available on their web site as an alternative to credit card payment. If it is, log on to the Extranet where purchases may be made using a password. Payment terms are specified by the city employee at that time. This is the preferred method. · When using a credit card, follow the standard purchasing guidelines that are used when paying by credit card on the telephone. It is generally safe to use a credit card on the Internet, but be cautious - see the first item in this subsection. Section 5. Payment The City of Chanhassen uses various processes in making payments for goods and services. 5.1 Standard Purchase Orders Purchase orders are used when required by the vendor to acknowledge the city's request for goods and services. A copy of the purchase order will be sent to the vendor when requested. · Obtain purchase order numbers from finance department. · Once invoice is received and purchase order complete, return completed purchase order with invoice attached and authorization for payment to the finance department. 5.2 Check requests · Used for processing payment for claims list or immediate pay. · If travel advance is needed, a check request may be processed on immediate payor claims list. · Once invoice is received and check request complete, return completed check request with invoice attached and authorization for payment to finance department. 5.3 Immediate Payment The finance department policy is for bills to be paid on the claims list. For certain exceptions, immediate pay may be used under the following guidelines: · Immediate pay is for payments that need to be made prior to claims list. Such items include getting discounts, avoiding late charges (Le.: credit card payments), purchases requiring payment with order, etc. · Immediate pay checks will be issued weekly. All requests for immediate pay checks must be submitted to the finance department prior to noon on Wednesday. · Checks will be issued, mailed, or returned to appropriate department on Thursdays. Requests for immediate pay may be submitted on a purchase order, check request, or expense voucher. Return completed form with attachments and authorization for payment, to the Finance Department. 5.4 Blanket Purchase Orders, Charge Accounts, and House Accounts · The city uses blanket purchase orders, charge accounts, and house accounts for frequently used vendors. This process requires submission of receipt with an account code and department approval. All new open accounts must be authorized by the requesting department director and finance department. 5.5 Invoices · Invoices must be attached to a completed check request, purchase order, or expense voucher along with proper authorization. Documentation must be returned to the finance department to be processed on claims list. 5.6 Statements · The finance department tracks all statements-reviewing for old invoices or credits. For vendors where the city has open accounts, the finance department only pays once a month after matching invoices to the statement. · All statements are to be mailed directly to the finance department. 5.7 Account Coding All requests for payment including check request, purchase order, or expense voucher must have an eleven digit code to process payment. Refer to department budget for reference of line item code Helpful hints for completing payment process: Eleven digit code -101 (fund) 1120 (department or project) 4210 (office supplies) Description - specific description of up to 30 characters. Vendor address line - limited to four lines. · Invoice Number - important to prevent duplicate payment. · Computer generated material preferred. Handwritten is acceptable if legible. · Open account slips - indicate eleven digit financial code. · Request for new business unit or object code. 5.8 Petty Cash · Used for reimbursement to employees for items $100 or less for expenditures made on behalf of the city. · An expense voucher must be completed, with a receipt attached, with proper departmental authorization obtained prior to reimbursement. · Employee must provide a signature for reimbursement from the finance department. 5.9 Guidelines for Payment Processing · Invoices must be attached to the check request, purchase order, or expense voucher. · Processing of payments on claims are due according to the schedules that are distributed to city staff at the beginning of each year. · Immediate pays are due by noon on Wednesday in the finance department, with checks issued the following day. · All requests for payments must have eleven digit code to process payment. Refer to department budget line item codes for proper coding. · All statements must be sent to the finance department. 5.10 Credit Cards The city will issue credit cards to certain individuals to allow for more efficient purchasing and to make purchases at businesses that no longer allow open accounts. To assist the finance department in ensuring consistency, accuracy. and thoroughness, the following are procedures to be followed for credit card use: Credit cards must be obtained from the finance department. Cards will be distributed to those departments that can demonstrate a need, such as efficiency or because vendors do not allow open accounts. The cards will be issued to departments with transaction and balance limits. No cash advances are allowed on the credit cards. The responsible person will review the credit card statement each month and code each expenditure, which needs to be signed by the department director and forwarded to the finance department. 5.11 Electronic Funds Transfer Electronic Funds Transfer may be required in some cases to complete a business transaction. The funds are transferred electronically from the parties bank accounts. Some instances may include transactions with the State of Minnesota, a federal agency, another local government, or a closing agent in the purchase or sale of real estate. These transactions need to follow the same guidelines for payment processing in Section 5.9. 5.12 Expense Reimbursement Expense vouchers are required for reimbursement to employees of city-related expenses on a monthly basis. (Sample expense voucher on page 32) If larger expenses are incurred, more than one voucher may be reimbursed in one month. All expense vouchers must contain proper account codes, department approval, and receipts must be attached where applicable. Expense vouchers greater than $50 will be reimbursed by check issued on the next immediate pay check run. Section 6. Agreement Processing Agreement Forms Agreements need to be reviewed by the city attorney unless they follow a previously used format such as Contracts for Private Redevelopment. However, if attachments to the agreement modify the agreement or provide new terms, the agreement should be reviewed by the city attorney. The city attorney's review must occur prior to submission for a council agenda and/or signatures. · The city attorney must review an agreement if it is written on the other party's form, or if a special agreement is being drafted. · Please note: These provisions apply to ALL agreements, including maintenance agreements, service contracts, etc. Authorization Levels · The city manager is authorized to sign agreements up to $25,000 in value. · Council authorization is required where a contract exceeds $25,000, and the agreement must be signed by the mayor and the city manager. · Where council authorization is required, a copy of the agreement must be included with the council Letter. Transmittal Form/Signatures · Once the agreement is approved, the other party should submit the original of the agreement for signatures (as many original copies can be submitted as required, but the city requires one original copy for the central agreement file). The agreement packet must include the agreement, any required bonds, and the certificate of insurance. · A transmittal form-available from the administration department-(sample agreement and transmittal form) must be completed and routed to the city attorney with the agreement packet. After the city attorney approves the packet, the agreement should be forwarded to the city manager and the mayor (depending on the contract amount) for signatures. The originating department is responsible for circulating the agreement for signatures. · Be sure to note on the transmittal form the date the insurance expires, and any special conditions, for instance, if the agreement calls for performance by a specific date. The transmittal form should also note the termination date of the agreement (either a specific date, when a condition is met, or that it is an ongoing agreement). Original to Administration · The central agreement file is maintained by administration. Once the agreement has been fully executed, the ORIGINAL must be submitted to the administration department for placement in the central file. The originating department may keep a copy of the agreement for the department file. · The administration department assigns agreement numbers. Section 7. Capital Outlay And Fixed Assets 7.1 Capitalization Threshold Capital outlay purchases are for items costing more than $5,000, are a tangible asset, and have a life expectancy of more than one year. These items must be included in each department budget in expense account 4701-4762. It should be noted that delivery charges and sales tax must be included as a cost of the item purchased when determining if the purchase is a capital outlay item. If the individual purchase is greater than $5,000 the item is a capital outlay purchase and now should become a recorded fixed asset. The amount to record for that fixed asset would be any charge "to place the asset in its intended location and condition for use." For example if the city were to purchase a street vehicle, all of the following would be considered part of that asset: the vehicle, warning lights, decals, delivery charges, sales tax, licensing, and any other costs to put the asset into its usable condition. Like items that are used together, for example - meeting room chairs, that are used together 7.2 Acquisition When a fixed asset is purchased, a fixed asset form needs to be filled out by the department making the purchase. The forms are kept in the finance department. The form should be completed when the entire cost of the asset can be supported by vendor invoices. The total of these vendor invoices should be the amount recorded for that asset. It should also be noted that all acquisitions should follow the city's capital replacement schedule when applicable. 7.3 Tracking and Transfer Once the asset is recorded on the city's financial accounting system, it is the responsibility of the assigned department to notify the finance department of any assets that have been transferred to a different department. This needs to be done by filling out a fixed asset form with the required information. In addition, at the end of the year, a physical count of all fixed assets will need to be done by each department assigned assets. This count will be done at or near the end of the calendar year. Each department will be provided a list of assigned assets by the finance department. The count will then be made by the department with any discrepancies noted on the list provided. 7.5 Deletion or Disposal of Fixed Assets When an asset is sold or disposed of the assigned department must complete a fixed asset form with the required information in order for the finance department to remove the asset from the financial accounting system. This includes items that are disposed of with no sale or trade value. Once again disposals should follow the capital replacement policy of the city. Section 8. Disposal of Surplus Property 8.1 Auction The city disposes of surplus equipment through public sale in accordance with council policy. Throughout the year the city collects items to be sold at public auction and sends them to an auctioneer with a description and number of items to be sold, and makes arrangements for those items to be transported. The auction house will forward a tabulation of the bids received along with payment. The information is reviewed by the equipment manager and then the payment is forwarded to the finance department. A fixed asset removal form must be filled out when an item sold at auction was listed on the fixed asset system. 8.2 Computer Equipment When a piece of computer equipment has reached the end of its useful life with the city, it may be disposed of in one of the following ways: · Sealed bids; · Donation to non-profit or governmental agency (city manager approval required); · Sell through auction; · Recycle through computer recycling vendor; · Dispose of as waste (unless it contains hazardous material) if the disposal cost is less than $100; · There may be costs associated with recycling or disposal of certain computer equipment such as CRTs in which case purchasing guidelines should be followed.