(A) (1) This section of the Fiscal Policy is intended to serve as a guide for all departments in obtaining supplies, materials, equipment, apparatus, construction, and repair work. The city's purchasing program is based on the principal of competitive bidding. Where it is not sought, or obtained, the reason must be valid or permitted by North Carolina General Statute. In public purchasing and contracting, utmost fairness is required in expending public funds. The practice of favoritism, whether to the user, department, or to the seller, is not permissible. The primary purchasing obligation in a governmental environment is commitment and adherence to fair and open competition.
(2) The city's purchasing operations are governed by North Carolina General Statutes and, therefore, must seek competitive offers from qualified sources of supply unless the items can be obtained through existing contracts established by the North Carolina Department of Administration Division of Purchase and Contract or are covered by other statutory exceptions. The city will participate in the State contract program whenever possible. Items required by city departments should be substituted for "acceptable" equivalents that are included in these contracts. Where items cannot be substituted, they will be obtained through standard purchase procedures.
(3) Local government purchasing is recommended by the North Carolina Department of State Treasurer to be a centralized function to ensure legal compliance and to obtain the most competitive pricing. As a general rule, the department heads are responsible for purchasing all supplies, services, materials, and equipment for their respective departments. The city does not employ a full-time purchasing agent, and must rely on departmental staff to identify their needs, obtain competitive pricing, and follow sound and legal purchasing practices. The Finance Director and the City Manager will provide assistance to departments heads. Purchasing is a shared authority with the final legal responsibility resting with the city Finance Director.
(4) It is recommended that the following steps be taken:
(a) All department heads should read and understand purchasing policies of the city;
(b) All employees involved in the purchasing process should become thoroughly familiar with the purchase and contracting procedures outlined in this policy;
(c) This policy should be kept where it is easily accessible for reference; and
(d) Comments concerning this policy or clarification of its contents should be directed to the Finance Director and City Manager.
(B) General rules and procedures for purchasing.
(1) Purchases under $500. Purchases of small, single items where the total cost is less than $500 may be authorized by the department head without use of a purchase order. However, employees must obtain either a copy of the invoice or other type of receipt and submit for processing to the department head. The responsible department head must indicate approval, vendor number and account number to be charged and thereafter submit the invoice or sales receipt, to the Finance Director within five calendar days following the purchase, or may face disciplinary action per the city personnel policy.
(2) Purchases of $500 to $1,000. All purchases of $500 to less than $1,000 (individually or in total) must be made with the use of a purchase order issued by the Finance Director from a purchase requisition. The department wishing to make the purchase will prepare a purchase requisition and present it to the Finance Director. Department Heads should seek competitive pricing for items to be purchased where there are multiple available vendors.
(3) Purchases of $1,000 to $5,000. Purchases of $1,000 to less than $5,000 are to be handled in accordance with division (B)(2) however, the City Manager must approve all expenditures in this cost category.
(4) Purchases of $5,000 to $30,000.
(a) In accordance with G.S. § 143-131, purchases of less than $30,000 will be made in the open market with or without necessary resort to formal invitation for bids or request for quotations. However, every effort should be given to obtain at least three written quotes. The method used to receive quotes is at the discretion of the requesting department director, but all quote documentation should be included and attached to electronic purchase requisition. Justification for not soliciting quotes should also be included in requisition. Purchases made using state contract or other cooperative purchase agreement should include the cooperative contract document.
(b) If deemed to be in the public interest, the City Council may not follow competitive bidding in cases of emergency and other statutory exceptions, which are listed below:
(c) Exceptions that apply to purchase contracts:
1. Purchase from other government agencies;
2. Competitive group purchasing;
3. Gasoline, diesel fuel, alcohol fuel, motor oil, fuel oil, or natural gas;
4. Sole sources (specified criteria must be met and Council approval required);
5. Information technology goods or services purchased through the North Carolina State Office of Information Technology or under request for proposals procedures authorized under G.S. § 143-129.8;
6. State contract purchases;
7. Used apparatus, supplies, materials, or equipment (does not include remanufactured, re-fabricated, or demo items);
8. Previously bid or "piggybacking" contracts (requires governing Council approval at a regular meeting upon ten days public notice); and
9. Purchase of goods and services from nonprofit work centers for the blind and severely disabled.
(d) Exceptions that apply to construction or repair contracts only:
1. Change order work;
2. Construction management at risk projects (per North Carolina General Statutes);
3. Force account work; note dollar limitations and bidding requirements for materials purchased for these projects;
4. Projects using unemployment-relief labor paid for in whole or in part with state or federal funds;
5. Contracts with North Carolina Department of Transportation for street construction and repair; and
6. All other North Carolina State contracts allowed by North Carolina General Statutes.
(e) Exceptions that apply to both construction and purchase contracts:
1. Special emergency involving the health and safety of the people or their property;
2. Guaranteed energy savings contracts (as per North Carolina General Statutes); and
3. Solid waste management facilities. Exceptions to competitive bidding are permitted where provided by North Carolina General Statutes. The above exceptions shall be amended automatically in accord with any changes to the State Statutes. In cases where the exception to competitive bidding is anticipated, all reasons for taking such action must be documented and the City Manager must approve the exception requested.
(5) Capital asset inventory record. All department heads are responsible for notifying the Finance Director of capital purchases over $5,000. This procedure is in place to keep a running inventory of capital assets per department for the annual audit and for insurance purposes.
(6) No purchase order required.
(a) The following purchases do not require a purchase order:
1. Advertising for required public notices, employment and city promotion;
2. Recurring dues and subscriptions as budgeted;
3. Recurring utilities;
4. General insurance and worker’s compensation premiums;
5. Postage and postage meter rental;
6. Recurring service contracts (copier, computer support, landscaping, waste disposal);
7. Uniform rentals and related cleaning services;
8. Motor fuels obtained by use of fleet purchase cards;
9. Salaries and payments for withholdings or contributions from salaries; and
10. Professional services (accounting, physicals, drug testing).
(b) A purchase order should be used for the above items only if the department has a need for tracking historical data. If a purchase order is requested for an item or service that requires a contract, a copy of the completed contract must be attached to the purchase requisition.
(C) Purchase specifications.
(1) Preparation of specifications.
(a) When goods or services are procured under the formal or informal bidding process, specifications must be prepared. All specifications should do at least four things:
1. Identify minimum requirements;
2. Encourage competitive bids;
3. Be capable of objective review; and
4. Provide for an equitable award at the lowest possible cost.
(b) Specifications should be as simple as possible while maintaining the degree of exactness required to assure that bidders are offering the quality of goods and services required. Such exactness also prevents bidders from taking advantage of their competitors by not offering the quality of goods and level of service required by the city.
(c) All specifications utilizing a name brand must include the term "or approved equal" to avoid being restrictive and eliminating fair competition from the bidding process.
(d) Different methods of structuring specifications include:
1. Qualified products on an acceptable vendor list;
2. Specification by blueprint or dimension sheet;
3. Specification by chemical analysis or physical properties;
4. Specification by performance, purpose, or use;
5. Specification by identification with industry standards; and
6. Specification by samples.
(D) Purchase requisitions.
(1) Requisitions. Any supplies, equipment, etc., to be purchased by city departments are to be requisitioned, if required, through the Finance Director. The department head must sign all requisitions and provide the necessary information on this document in order for the Finance Director to consider approval and prepare a purchase order. The Finance Director can approve requisitions up to $1,000. All requisitions over $1,000 must be approved by the City Manager.
(2) Preparation of a purchase requisition. The requisition should be sent to the Finance Director when completed. All requisitions must contain the following information or the Finance Director or City Manager will return them to the sending department:
(a) Account code - the general ledger account to be charged with the expenditure;
(b) Date of request;
(c) Requesting employee signature;
(d) Department head signature;
(e) Complete item description including quantity - stock or item number, correct name of item if known, color, any specifications and the quantity and unit of the item requested;
(f) Vendor number; the department’s choice should be listed under “Vendor A.” A new vendor’s complete mailing address must be included on the form;
(g) Date item or service is needed; and
(h) Provide the vendor quote documents if available or otherwise when required.
(E) Purchase orders.
(1) Purpose of purchase orders. The purchase order serves as authorization to a vendor to furnish a service or product to the city at the prices shown thereon. It also serves as the basis for encumbering departmental funds and assures the supplier that funds are available for the purchase. As a medium for encumbering funds, it represents a means for providing management with a more accurate and complete statement of financial position and is instrumental in preventing departments from over-spending their budgets. If there are not sufficient funds remaining in the requisitioned expense line item the order cannot be placed until a budget amendment or departmental fund transfer has been prepared and approved to provide necessary funds.
(2) Purchase order preparation. All purchase orders are to be prepared by the Finance Director. Confirming orders will not be issued to suppliers by any department once an order has been placed, unless prior authorization is obtained from the City Manager or unless it falls under the category of an emergency purchase. Any purchase made which is not in accordance with the procedures as explained in this subchapter will require approval by the City Manager. Any such purchases otherwise made or committed for will not be paid until a written explanation, with the approval of the City Manager, is available. If approval is not obtained, the employee may face disciplinary action per the city personnel policy.
(3) Changes to purchase orders. If the vendor and/or the department head fail to notify the Finance Director of any changes or additions to the purchase order, only the original cost of the purchase order will be paid. Any increase in the price of the merchandise or service must be fully justified by the department head and approved by the City Manager.
(4) Purchase order distribution.
(a) The Finance Director will forward system generated original purchase orders to the requesting department head. Completed purchase orders should be transmitted to the vendor as deemed appropriate by the requesting department head and in accordance with procedures established for the vendor. Use of fax and/or e-mail is encouraged.
(b) A copy of each purchase order along with the approved requisition request and supporting documentation will be maintained by the Office Technician for subsequent matching to the resultant invoice.
(F) Blanket purchase orders; blanket purchase order preparation. This procedure is to provide an additional purchasing tool for obtaining items when the amount of paper work involved or the nature of the purchase makes it impractical or impossible to use regular purchasing channels. The Finance Director and departments shall work together to use this procedure when it appears to be in the city's best interest. The City Manager must approve blanket purchase orders. The procedure for use of a blanket purchase order is as follows:
(1) The department must make a request to the Finance Director (by requisition) giving the following information:
(a) Account code - the general ledger account to be charged with the expenditure;
(b) Date;
(c) Requesting employee signature;
(d) Department head signature;
(e) Complete item description including quantity - stock or item number, correct name of item if known, color, any specifications and the quantity and unit of the item requested;
(f) Period of the request (dates);
(g) Maximum amount anticipated to be purchased in a month; and
(h) Suggested vendors - the department's choice should be listed under "Vendor." The requesting department should make every effort to provide two or three vendors for the requested item(s). The vendor's complete mailing address will be included on the form.
(2) The Finance Director will review all requests.
(3) Maximum monthly expenditures will be provided on the blanket purchase order. Such maximums will be worked out with the individual department.
(4) Blanket purchase orders are usually issued twice a year and are good for six months.
(5) The maximum amount of the blanket purchase order will be encumbered until the encumbrance is liquidated. Departments are not to exceed the total amount in funds encumbered for the period of the order. It will be the responsibility of each department to ensure that purchases made against all blanket purchase orders do not exceed the total dollar amount of the purchase order. Each department will monitor purchases against purchase orders for their department to insure compliance.
(6) The vendor will invoice the city at the end of each month.
(7) The total amount specified on the purchase order shall not be exceeded.
(8) Blanket purchase orders are intended for items that the vendor has in stock only. Items that the vendor must order should be handled through regular purchasing procedures. This eliminates paying shipping costs or special order costs from the vendor.
(9) No blanket purchase orders will be issued for items that can be purchased more effectively and economically through normal purchasing procedures.
(10) In cases where a department has verified repetitive use of the same items, blanket purchase orders can be established with vendors to supply these items for a predetermined time period at a set cost. The advantage to this is that it provides the vendor with expected usage; thus, they can keep certain amounts available for immediate shipment, which in turn greatly aids the using department. Using departments should review their needs to identify such items.
(G) Small purchases (petty cash).
(1) Purpose. Sufficient controls must be established to insure proper protection of funds, provide an adequate audit trail, and insure that small purchase authorizations are not used to circumvent normal purchasing practices. Small purchase procedures may be utilized to procure supplies and services within the dollar limitations and other constraints prescribed by policy. They can be appropriately used to obtain small quantities not available under existing contracts, and/or to buy very limited quantities where the value of goods is immaterial. Persons other than department heads authorized to make purchases shall be designated in writing and be held personally liable for unauthorized purchases or improper practices.
(2) Small purchase procedures. There are two basic methods authorized for handling small purchases, petty cash and blanket purchase orders, as described in § 36.36. Blanket purchase orders are the preferred method; the use of petty cash should be kept to a minimum. Examples include the following:
(a) Office supplies;
(b) Postage and other post office expenditures;
(c) Reimbursements under $20 for meals, gas, etc.; and
(d) Purchases for city functions (ice, water, drinks, food).
(H) Emergency purchases.
(1) Emergency defined. Per the North Carolina General Statutes, an emergency is defined as an immediate and present condition involving the health and safety of people or their property and not one, which may or may not arise in the future or one that is apt to arise or may be expected to arise. This subchapter applies only to the city's purchase order policies. The Mayor has the authority to declare a state of emergency and approve purchases without bidding per the North Carolina General Statutes.
(2) Emergency purchase procedures.
(a) When an emergency does arise, and can be rectified only by immediate purchase or rental of equipment, supplies, materials or services, the following procedures must be followed:
1. Secure a purchase order from the Finance Director or the City Manager by telephone. If the emergency occurs when offices are closed, the department should proceed to acquire only the materials or services necessary to meet the emergency.
2. On the next working day, the Department Head must submit a requisition to the Finance Director with the following information:
a. Nature of the emergency;
b. Itemized list of the purchases made;
c. Cost per item;
d. Vendor's name and address;
e. Account number;
f. Authorizing signature of the department head; and
g. Purchase order number - if one was given.
3. The Finance Director will prepare a confirming purchase order for distribution in accordance with § 36.36(E)(4) above.
(b) No emergency purchase orders will be given unless it is an emergency as described above. North Carolina General Statutes govern this procedure.
(3) Telephone purchase order procedures. In certain emergency or special situations, the Finance Director will issue a purchase order number over the telephone to the requesting department. In such cases, the requesting department will be required to submit a supporting requisition to the Finance Director within two business days. The requisition is to include the vendor, complete item description, quantity, price, and the purchase order number that was issued.
(I) Miscellaneous purchasing provisions.
(1) Cancellation of purchase orders. All purchase order cancellations are to be handled by the Finance Director. If a department desires to cancel a purchase order, the request should be made directly to the Finance Director. The request should contain the reason for cancellation and carry appropriate authorization signature. Cancellations can be conducted over the phone provided that the Department Head is the person who requests the cancellation. The Finance Director will notify the vendor of the cancellation and the reason. Outstanding purchase orders will be reviewed periodically and those over three months old will be cancelled.
(2) Purchase returns. To insure proper credit is obtained for items being returned to vendors, it is important that the proper procedures be followed.
(a) In all cases the user department should send written notice to the Finance Director indicating which items are being returned, the date the return was affected and the signature of the appropriate employee. Acknowledgment of the returned items should be obtained from the vendor with appropriate documentation provided to the Finance Director.
(3) Partial payment procedures. The purpose of this procedure is to provide a method for making partial payments on a purchase order when, for reasons beyond the control of the supplier, all items requested cannot be delivered at the same time. It shall be a policy to make partial payments whenever partial shipments are made providing the goods are received in proper condition.
(4) Federal and state funds. When purchases of equipment, supplies and materials are to be made with funds obtained from federal and state government, the exact source of funding must be noted on the requisition form. This is necessary because there are often inconsistencies between federal regulations and state statutes with respect to purchasing. If a purchase is made with federal or state government funds, and upon auditing it is determined that the purchase was not in compliance with federal regulations, the city may have to repay the granting government for the amount of the purchase. For that reason, North Carolina General Statutes and federal regulations need to be compared to insure purchase is made in compliance with state and federal regulations.
(5) Charge accounts. Charge accounts may not be established without the approval of the Finance Director. The Finance Director must sign all applications for credit. Vendors should mail invoices addressed to the city. All vendor open charge account payments will be made only by reference to invoices.
(Ord. passed 11-14-2016)