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HomeMy WebLinkAbout2.d. Purchasing PolicyAGENDA ITEM: Purchasing Policy AGENDA SECTION: Discussion PREPARED BY: Jeff May, Finance Director AGENDA NO. 2_b_ ATTACHMENTS: Draft Revised Purchasing Policy, LMC Article, S.F. No. 3622 (As Introduced) APPROVED BY: Y RECOMMENDED ACTION: Discussion only. 4 ROSEMOUNT CITY COUNCIL City Council Work Session: June 3, 2008 EXECUTIVE SUMMARY ISSUE The issue before the City Council is the discussion of possible modifications to the City's current Purchasing Policy to reflect changes in State Statutes. BACKGROUND This item is on the agenda to bring forth suggestions for modifications to the City's Purchasing Policy. The last time the policy was updated was in 2001 after the State had made changes in the competitive bid thresholds. Because of changes in the costs of doing business the State has made further changes in the statutes to once again increase the competitive bid thresholds. In 2001 the policy was amended to incorporate part of the statute changes but our policy remained more restrictive than the statute required in relation to what the City Council must approve before the purchases were made. As you can see from the suggestions in the draft policy we would continue to be more restrictive than statute. SUMMARY After discussion this evening, staff will be bringing a revised Purchasing Policy for the City Council to approve at the June 17 meeting. CITY OF ROSEMOUNT POLICY TITLE: PURCHASING POLICY PROPOSED BY: FINANCE DATE APPROVED BY COUNCIL: June 21, 1994 (Amended April 17, 2001 June 3, 2008) PURPOSE The purpose of this policy is to establish specific guidelines for the purchase of goods and services by employees of the City of Rosemount. The use of public funds requires diligent scrutiny and careful regulation. The controls necessary are in two areas. First, the statutory law, which clearly details procedures for the purchase of goods and services by City employees. Second, the controls not required by statute, but that are important to a good system of internal control and a sound management program. This policy will outline the laws governing contracts and bids and describe the basis for a good internal control system. Following the law and the City's purchase system should help City officials obtain maximum benefit from each dollar of public funds. CONTRACTING BID LAWS A City entering into an agreement for the sale or purchase of supplies, materials, equipment or the rental thereof, or the construction, alteration, repair or maintenance of real or personal property must abide by the statutes relating to contracting and bidding. Minnesota Statute 471.345 was established to provide dollar limits for all cities upon contracts which shall or may be entered into on the basis of competitive bids, quotations or purchase or sale in the open market. This statute puts the following basic requirements on cities (based on the estimated contract amount): 1. For contracts over $50,000 $100,000 sealed bids shall be solicited by public notice in the manner and subject to the particular requirements of the City. The sealed bids shall be solicited by public notice and be kept on file. 2. For contracts from $40,000 $25,000 to $50,000 $100,000 sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase or sale when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. All quotations obtained shall be kept on file for a period of at least one year after receipt thereof. Page 2 Purchasing Policy 3. For contracts under $40,000- $25,000 the contract may be made upon quotation or in the open market, in the discretion of the City. If the contract is made upon quotation it shall be based, so far as practicable, on at least two quotations which shall be kept on file for a period of at least one year after their receipt. The provisions noted in this policy are not intended to be an exhaustive list of Minnesota bid laws. CITY POLICY It is the policy of the City of Rosemount that we follow State statutory guidelines in purchasing matters. However, we additionally require City Council approval on all expenditures between over $50,000 $25,000 before the purchases are made. INTERNAL CONTROLS The primary basis for the City's system of internal control is the City's annual budget. The budget, as adopted by the City Council, serves as the basis for the City's spending for that year. The appropriate level of responsible official must approve any expenditure over budget. Also, any expenditure that would utilize money budgeted from one area of a department budget for another purpose must be communicated by that department head to the City Administrator for his /her verbal approval. In addition, all purchase orders and invoices presented for payment must be approved by the appropriate department head or supervisor and reviewed for reasonableness and proper account coding by the Finance Department. In order to expedite payments to vendors in a timely fashion, law allows the City Council to delegate authority to an appointed official to pay claims prior to their approval. The City Council, by resolution (see attached Resolution 1996 -94), has delegated this authority to either the City Administrator or the City Clerk. Jovernor approves bill increasing competitive bid threshold Page 2 of 3 rom: Brotzler,Andy ;ent: Thursday, April 24, 2008 7:34 AM b: Dawley,Morgan; Schultz,Dan; Cook,Rick; May, Jeff; Koslowski,Jim :c: Lindquist,Kim; 'LeFevere, Charlie L.' subject: Emailing: story YI for future project bidding requirements. 0 I LEAGUE of MINNESOTA CITIES CITIES BULLETIN Governor approves bill increasing competitive bid threshold ONLINE EDITION Published: April 23, 2008 [ssue 13 9y Gary Carlson Jov. Pawlenty last Thursday signed into law Chapter 207, legislation that increases the competitive bid threshold rom $50,000 to $100,000. The bills, SF 3622 and HF 3646, were authored by Sen. Rick Olseen (DFL- Harris) and Rep. Paul Marquart (DFL- 3ilworth). The legislation was initiated by the Minnesota Association of Townships, and was supported by the league of Minnesota Cities (LMC) and the Minnesota Inter County Association. The House approved the bill on a 115-17 vote while the Senate vote was 64 -3. The law will be effective on Aug. 1. The state's competitive bidding statute (Minnesota Statutes. section 471.345) generally covers contracts entered into )y a municipality for the sale, purchase, or rental of supplies, materials, or equipment or for the construction, theration, repair, or maintenance of real or personal property. The approved legislation increases the contract threshold amount that would trigger the competitive bidding equirment from $50,000 to $100,000. The threshold was increased in 2000 from $25,000 to $50,000 for cities with population of 2,500 or more and to $35,000 for cities with a population under 2,500. In 2004, the distinction based )n city size was repealed, effectively increasing the threshold for cities with populations under 2,500 to $50,000. :f a contract is estimated to exceed $25,000, but not to exceed $100,000, the new law specifies that competitive Adding is allowed but not required. These limits are currently set at $10,000 and $50,000. For contracts in this -ange, the contract may be made either upon sealed bids or by direct negotiation, by obtaining two or more potations for the purchase or sale when possible. However, if the city chooses to use the competitive- bidding ,rocess, it must follow through with the procedure even though it was not originally required. a contract is estimated to be $25,000 or less, the city has the choice of making the contract upon quotation or in he open market. If the city makes the contract upon quotation, the city must obtain at least two quotations and keep hem on file for at least one year after their receipt. The threshold changes contained in the bill do not change the threshold amount for contracts funded at least in part )y special assessments under Minnesota Statutes, section 429.041, subdivision 1. /13/2008 Governor approves bill increasing competitive bid threshold Page 3 of 3 During the House floor debate, several amendments were offered including an amendment that would have repealed the best value contracting option for local units of government enacted just last year. The amendment was defeated on a 39 -93 vote and, therefore, state law continues to allow cities to award contracts to contractors offering the "best value" under a request for proposals, as described in Minnesota Statutes, section 16C.28. For more information, contact Gary Carlson, LMC, at gcarlson @hnc.org or (651) 281 -1255. Return to Home 5/13/2008 LMC Board Editor: Designer: Executive Director: of Directors Claudia Hoffacker Jason Little Jim Miller Copyright A© 2008 League of Minnesota Cities 145 University Ave. West, St. Paul, MN 55103 Phone: 651- 281 -12001 Toll Free: 1- 800 925 -1122 Fax: 651- 281 -12991 TDD: 651- 281 -1290 S.F. No. 3622, as introduced 2007 2008th Legislative Session (2007 -2008) 1.1 A bill for an act 1.2 relating to local govenunent; changing the contract threshold amounts subject 1.3 to certain requirements of the Uniform Municipal Contracting Law; amending 1.4 Minnesota Statutes 2006, sections 103E.705, subdivisions 5, 6, 7; 471.345, 1.5 subdivisions 3, 4; Minnesota Statutes 2007 Supplement, section 471.345, 1.6 subdivisions 3a, 4a, 5. 1.7 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.8 Section 1. Minnesota Statutes 2006, section 103E.705, subdivision 5, is amended to 1.9 read: 1.10 Subd. 5. Repairs not subject to bidding requirements. If the 1.11 drainage authority finds that the estimated cost of repairs and maintenance of one drainage 1.12 system for one year will be less than the greater of-$. 000 the dollar amount requiring the 1.13 solicitation of sealed bids under section 471.345, subdivision 3, or $1,000 per mile of open 1.14 ditch in the ditch system, it may have the repair work done by hired labor and equipment 1.15 without advertising for bids or entering into a contract for the repair work. 1.16 Sec. 2. Minnesota Statutes 2006, section 103E.705, subdivision 6, is amended to read: 1.17 Subd. 6. Annual repair assessment levy limits. The drainage authority may give 1.18 notice of and hold a hearing on the repair levy before ordering the levy of an assessment 1.19 for repairs. In one calendar year the drainage authority may not levy an assessment for 1.20 repairs or maintenance on one drainage system for more than 20 percent of the benefits of 1.21 the drainage system, $1,000 per mile of open ditch in the ditch system, or' $50,000 the 1.22 dollar amount requiring the solicitation of sealed bids under section 471.345, subdivision 1.23 3 whichever is greater, except for a repair made after a disaster as provided under 1.24 subdivision 7 or under the petition procedure. Sec. 2. 1 S.F. No. 3622, as introduced 2007 2008th Legislative Session (2007 -2008) 2.1 Sec. 3. Minnesota Statutes 2006, section 103E.705, subdivision 7, is amended to read: 2.2 Subd. 7. Repair and construction after disaster. The drainage authority may 2.3 repair and reconstruct the drainage system without advertising for bids and without regard 2.4 to the $1,000 per mile of open ditch or $507000 the dollar amount requiring the solicitation 2.5 of sealed bids under section 471.345, subdivision 3, limitation if: 2.6 (1) a drainage system is destroyed or impaired by floods, natural disaster, or 2.7 unforeseen circumstances; 2.8 (2) the area where the drainage system is located has been declared a disaster 2.9 area by the President of the United States and federal funds are available for repair or 2.10 reconstruction; and 2.11 (3) the public interests would be damaged by repair or reconstruction being delayed. 2.12 Sec. 4. Minnesota Statutes 2006, section 471.345, subdivision 3, is amended to read: 2.13 Subd. 3. Contracts over $59;000 $100,000. If the amount of the contract is 2.14 estimated to exceed $50;000 $100,000, sealed bids shall be solicited by public notice in the 2.15 manner and subject to the requirements of the law governing contracts by the particular 2.16 municipality or class thereof provided-that. With regard to repairs and maintenance of 2.17 ditches, 2.18 the-amount-speeifted-in. the provisions of section 103E.705, subdivisions 5, 6, and 7, apply. 2.19 Sec. 5. Minnesota Statutes 2007 Supplement, section 471.345, subdivision 3a, is 2.20 amended to read: 2.21 Subd. 3a. Contracts over $503000 $100,000; best value alternative. As an 2.22 alternative to the procurement method described in subdivision 3, municipalities may 2.23 award a contract for construction, alteration, repair, or maintenance work to the vendor or 2.24 contractor offering the best value under a request for proposals as described in section 2.25 16C.28, subdivision 1, paragraph (a), clause (2), and paragraph (c). 2.26 Sec. 6. Minnesota Statutes 2006, section 471.345, subdivision 4, is amended to read: 2.27 Subd. 4. Contracts from $9;000 $25,000 to $50;000 $100,000. If the amount of 2.28 the contract is estimated to exceed $19;000 $25,000 but not to exceed $507088. $100,000, 2.29 the contract may be made either upon sealed bids or by direct negotiation, by obtaining 2.30 two or more quotations for the purchase or sale when possible, and without advertising for 2.31 bids or otherwise complying with the requirements of competitive bidding. All quotations 2.32 obtained shall be kept on file for a period of at least one year after receipt thereof. Sec. 6. 2 S.F. No. 3622, as introduced 2007 2008th Legislative Session (2007 -2008) 3.1 Sec. 7. Minnesota Statutes 2007 Supplement, section 471.345, subdivision 4a, is 3.2 amended to read: 3.3 Subd. 4a. Contracts from $-1 ,000 $25,000 to $503000 $100,000; best value 3.4 alternative. As an alternative to the procurement method described in subdivision 4, 3.5 municipalities may award a contract for construction, alteration, repair, or maintenance 3.6 work to the vendor or contractor offering the best value under a request for proposals as 3.7 described in section 16C.28, subdivision 1, paragraph (a), clause (2), and paragraph (c). 3.8 Sec. 8. Minnesota Statutes 2007 Supplement, section 471.345, subdivision 5, is 3.9 amended to read: 3.10 Subd. 5. Contracts $25,000 or less than- $0;000. If the amount of the contract is 3.11 estimated to be $-1.0;000 $25,000 or less, the contract may be made either upon quotation 3.12 or in the open market, in the discretion of the governing body. If the contract is made upon 3.13 quotation it shall be based, so far as practicable, on at least two quotations which shall be 3.14 kept on file for a period of at least one year after their receipt. Alternatively, municipalities 3.15 may award a contract for construction, alteration, repair, or maintenance work to the 3.16 vendor or contractor offering the best value under a request for proposals as described in 3.17 section 16C.28, subdivision 1, paragraph (a), clause (2), and paragraph (c). Sec. 8. 3