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Purchasing Policy 10-12-2020 Purchasing Policy City of Chanhassen, Minnesota Adopted on February 10, 2003 Amended on July 14, 2003 June 26, 2006 July 14, 2008 June 27, 2011 October 10, 2016 October 12, 2020 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. 1.3 Quick Reference Guide for Purchases Value of Purchase Quotations Needed Payment Request Options Approvals Needed Prior to Purchasing Less than $100 None Petty Cash Credit Card Check Request Department Finance City Manager City Council Yes No No No $100-$4,999 Departmental Discretion Credit Card Check Request Purchase Order Department Finance City Manager City Council Yes No No No $5,000-$10,000 Two Written Quotes or Proposals Credit Card Check Request Purchase Order Department Finance City Manager City Council Yes No No No $10,000-$19,999 Two Written Quotes or Proposals Credit Card Check Request Purchase Order Department Finance City Manager City Council Yes Yes Yes No $20,000-$174,999 Two Written Quotes or Proposals Check Request Purchase Order Department Finance City Manager City Council Yes Yes Yes Yes Greater than $175,000 Sealed Bids Check Request Purchase Order Department Finance City Manager City Council Yes Yes Yes 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. 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 $20,000. These are contractual accounts for services that are approved as part of the budget process. The vendors that fall under this situation include Centerpoint Energy, Xcel Energy, Metropolitan Council Environmental Services, Carver County Sheriff’s Office, United States Treasury, State of Minnesota, PERA, and the City’s insurance and healthcare providers. Any payments to these vendors that are outside the normal course of business will be presented to the City Council for individual approval. 1.4 Professional Services Utilizing a Request for Proposal (RFP) process, Bid or Quote is required for soliciting professional services in excess of $25,000 except if an established consultant pool is in place. This includes reoccurring annual contracts. Refer to Section 4.5 for additional information concerning RFP’s. For professional services less than $25,000, or when utilizing an established consultant pool, direct solicitation and negotiation can be utilized. Unique professional services are not required to utilize an RFP process, as long as those professional services are specialized or based on specific expertise or professional abilities. All professional services shall have a written agreement. Refer to Section 6. Authorization of professional services shall obtain the required approvals noted in the Quick Reference Guide of Section 1.3. Section 2. Purchasing Practices 2.1 Ethics / 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. Examples 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 §471.895 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). Employees may not use government pricing for personal purchases. 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. They contain recycled content, are sustainably harvested, are made with less toxic materials, or conserve energy or water. 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 MN Pollution Control Agency at www.pca.state.mn.us. 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 paper copies • 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 or compostable kitchen dishware - reduces waste • Purchase products in reusable, refillable, or returnable containers - containers may be sent back to the vendor for reuse Avoid single serve bottled water, promote reusable or compostable containers Copy Paper and Envelopes • Recycled content - when possible, purchase 100% post-consumer paper. At a minimum, paper shall contain at least 30% post-consumer recycled content. • 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-VOC 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%) Look for models of office machines that are certified as Energy 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 • Lighting  Select LEDs when replacing light bulbs if possible Lumber and Wood Products • Plastic lumber - alternative to chemically treated wood • Treated wood - purchase only AGO treated wood • When practicable, the city will give preference to wood products that are certified to be sustainability harvested by a comprehensive, performance-based certification system. The certification system will include independent third-party audits, with standards equivalent to, or stricter than, those of the Forest Stewardship Council certification. Office Cleaners • Reusable, returnable packaging - purchase cleaners in concentrates • Plastic waste bags - purchase bags that are made from recycled materials Environmentally friendly cleaning products – less toxicity, no aerosols, VOCs Paint • Latex paint - purchase latex paint rather than oil-based paint. Paint should be 10% to 100% post-consumer content, excluding traffic paint. Paint shall be free of toxic heavy metals 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 administrative staff 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 $10,000 and is less than $20,000 approval is needed by City Manager and the Finance Director. 5. Department director forwards request for payment with invoice to the Finance Department for approval and input into financial accounting system. 6. Payment is made by the Finance Department. 7. Finance produces check register for approval by City Council. Section 4. Purchasing Alternatives 4.1 Sealed Bids • A formal sealed bid procedure is required for all purchases in excess of $175,000 except for professional services. Online (electronic) bidding platforms are acceptable to use. • 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 contract, see Section 6. 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. Participation in other purchasing cooperatives is encouraged by all departments. • 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 $5,000 but not to exceed $99,999, 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 (invoices). 4.4 Emergency Emergency situations may arise where the normal purchasing process cannot be followed for the procurement of goods and services. An emergency means an unforeseen combination of circumstances that calls for immediate action to prevent a disaster from developing or occurring. Minnesota Statute §12.29 gives the Mayor the authority to declare a local emergency for up to three days, which period may be extended by the City Council. During such an emergency, if authorized by the City Council, the City is not required to use the typically mandated procedures for purchasing and contracts. During that time, the governing body may waive compliance with the prescribed purchasing guidelines including compliance with M.S. 471.345, Uniform Municipal Contracting Law. Whenever possible the current purchasing policies and procedures should be followed even when an emergency is declared, but as described above if the emergency requires speedy action essential to the health, safety, and welfare of the community and if there has been an emergency declaration, the standard purchasing policies and procedures can be waived in accordance with Minnesota Statute §12.37. 4.5 Request for Proposals (RFP) RFP’s 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 proper 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 key 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. • Not to Exceed or Lump Sum Fee to provide the service along with a fee 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 requirements. 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/or legal counsel prior to initiating or modifying a lease. 4.7 On-Line Purchases The following guidelines are recommended for purchasing products over the Internet: • All addresses for secure purchasing sites will have an https:// prefix, make sure to make all purchases from a secure site as described above. • No purchase should be made from a city account while connected to any public WiFi service. • Whenever possible avoid from making credit card purchases or sharing of credit card information over the telephone. The preference is always to purchase via a secured internet portal or in person. • City credit card account numbers should not be saved on any ecommerce site. • Avoid online purchases from sites located outside the United States. There is usually an alternative US distributor. 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. • The purchase order number used will be the employee’s number. • 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 Accounts Payable Payments The Finance Department policy is for bills/invoices to be paid on one of the weekly claims lists. • All accounts payable payments will be issued weekly. All payments must be submitted to the Finance Department prior to 3:00 p.m. on Wednesday. • Checks will be issued, mailed, or returned to appropriate departments on Thursdays. Payments to be processed electronically will be credited to the vendors bank accounts on the following Monday. • All new vendors are required to submit a W-9 before first payment is issued. 5.3 Blanket Purchase Orders, Charge Accounts, Online 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. House accounts are not to be used for personal purchases. In addition, use of city online accounts (including Amazon & Other discount retailers) for personal purchases is strictly prohibited. Violation of this policy can result in disciplinary action or termination. 5.4 Invoices • Invoices must be attached to any accounts payable payment, purchase order, or expense voucher along with proper authorization. Documentation must be returned to the Finance Department to be processed on claims list. 5.5 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. 5.6 Account Coding All requests for payment including, purchase orders, 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) 4110 (category). • 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. 5.7 Petty Cash • Used for reimbursement to employees for items $100 or less for expenditures made on behalf of the City. • A receipt or invoice with proper departmental authorization must be obtained prior to disbursement. 5.8 Guidelines for Payment Processing • Invoices, purchase orders, or expense voucher must be submitted for payments. • All accounts payable items are due by 3:00 p.m. on Wednesday in the Finance Department, with checks issued the following day. • All accounts payable items must have an eleven digit code to process payment. Refer to department budget line item codes for proper coding. 5.9 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, attach a detailed receipt and needs to be signed by the department director, and forwarded to the Finance Department. • Credit cards will only be issued to those employees that can demonstrate a need and have department head approval. Several purchases per year for city business are needed in order for a credit card to be issued. 5.10 Electronic Funds Transfer Electronic Funds Transfer may be required in some cases to complete a business transaction. The funds are transferred electronically from the party’s 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. 5.11 Expense Reimbursement A completed and properly authorized form is required for reimbursement to employees for City-related expenses. All requests must contain proper account codes, department approval, and receipts must be attached. Expenses will be reimbursed by check issued on the next 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 Standard Form of Agreement or 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 • Department Heads may authorize agreements up to $5,000 in value.  The City Manager is authorized to sign agreements up to $20,000 in value, however he/she may delegate the authority for approval of such agreements.  The Finance Director must also authorize agreements between $10,000 and $19,999. • Council authorization is required where a contract exceeds $20,000, 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 request. 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). The agreement packet must include the agreement, any required bonds, and the certificate of insurance. Section 7. Capital Outlay and Fixed Assets 7.1 Capitalization Threshold Capital outlay purchases are for items costing more than $10,000, 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 $10,000 the item is a capital outlay purchase and now should become a recorded capital asset. The amount to record for that capital asset would be any charge “to place the asset in its intended location and condition for use.” 7.2 Acquisition When a capital asset is purchased, a capital 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 capital asset form with the required information. In addition, at the end of the year, a physical count of all capital assets will need to be done by each department’s 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. 7.4 Deletion or Disposal of Fixed Assets When an asset is sold or disposed of the assigned department must complete a capital 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 capital asset removal form must be filled out when an item sold at auction was listed on the capital 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. Section 9. Procurement Policies when Using Federal Dollars/Grants 9.1 Purchasing Thresholds All purchases by the city and its agents, when using federal funding and making purchases in excess of $2,000 for construction dollars are subject to the Davis-Bacon Act. In addition construction purchases in excess of $2,000 and purchases in excess of $3,000 for all other purchases, must meet small purchase procurement practices and obtain multiple price/rate quotes from qualified sources. 9.2 Affirmative Action Practices The city and all its agents will take all necessary affirmative action steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible as per “2 CFR 200.321 (b). 9.3 Sealed Bids for Federal Purchases All purchases by the city and its agents will follow all “sealed bid” requirements as per “2 CFR 200.323 (a)”. This includes but is not limited to documenting a cost or price analysis in connection with every procurement action in excess of the “Simplified Acquisition Threshold”, including contract modifications. 9.4 Reviewing for Contractors under Suspension or Debarment In all cases the city and its agents will review the excluded parties list (https://www.sam.gov/), to ensure that no tentative parties, suspended and/or debarred contractors are contracted with when using federal or city dollars.