Finance Committee

City of Oconomowoc Finance Committee Aldermen: Rosek, Chairman / Ellis, Secy / Spiegelberg Tuesday, April 06, 2021 - 7:00 PM City Hall - Council Chambers 174 E. Wisconsin Ave. Oconomowoc, WI 53066 Notice: If a person with a disability requires that the meeting be accessible or that materials at the meeting be in accessible format, call the City Clerk at least 48 hours prior to the meeting to request adequate accommodations. Tel: (262) 569-2186. 1. Call to order and confirmation of appropriate meeting notification 2. Committee Business a. Consider/recommend City of Oconomowoc Revised Procurement Policy 3. Adjourn ________________________________ Diane Coenen, City Clerk City of Oconomowoc Notice is hereby given that a majority of the Common Council will be present at the above scheduled meeting to gather information about a subject over which they have decision-making responsibility. This constitutes a meeting of the Common Council pursuant to State ex rel. Badke v. Greendale Village Board, 173Wis. 2d 553, 494 N.W. 2d 408 (1993) and must be noticed as such, although the Common Council will not take any formal action at this meeting. 1  MEMORANDUM DEPARTMENT Date: March 31, 2021 To: Mayor Magnus, Finance Committee, City Council and City Administrator Matt Trebatoski From: Laurie Sullivan, Finance Director Re: Updated Procurement Policy RELATES TO THE STRATEGIC PLAN Strategic Goal- N/A BACKGROUND The City’s procurement policy was last updated in 2012. ADDITIONAL ANALYSIS The policy is being updated to provide clarity to department heads and to City Council. The revised policy lays out the procedure and approval paths for all City purchases. This policy provides definitions and tables to clear up any ambiguities from the previous policy. The revised policy provides the Council information regarding the internal controls in place to supervise and approve purchases. Purchasing dollar limits have not been changed in over 12 years. This policy changes the Purchase Order requirement from $5K to $10K. All other levels remain the same as the current policy. The revised policy lays out the roles of all involved in the purchasing process. We will review the proposed changes to the policy at the Finance meeting on April 6, 2021. FINANCIAL IMPACT N/A RECOMMENDATION Recommend approval of the updated procurement policy. SUGGESTED MOTION Motion to recommend Council approve the updated Procurement Policy. 1 2  CITY OF OCONOMOWOC PROCUREMENT POLICY Adopted by Council: 12/1/09 Revised by Council: 8/17/10, 7/17/12, 4/6/21 3 Table of Contents I. OVERVIEW……………………………………………………………………………………. 3 II. PROCUREMENT CATEGORIES……………….…………………………………………... 5 III. PROCUREMENT REQUIREMENTS…..……………..…………………………..………… 7 IV. PROCUREMENT APPROVALS…………………………………………………………….. 9 V. USE OF PURCHASE ORDERS……………………………………………………………. 10 VI. EXCEPTIONS….……………………………………………………………………….….…. 11 VII. CHANGE ORDER PROCESS………………………………………………………………. 12 VIII. ROLES & RESPONSIBILITIES ……………………………………………………..……… 13 IX. EMERGENCY…………………………………………………………………………………..14 2 4 I. OVERVIEW PURPOSE The purpose of this policy is to provide procedures and guidance for procurement of goods and services for the City of Oconomowoc. The policies set forth are intended to provide reasonable assurance that the lowest cost, highest quality good or service is obtained, while balancing the need for flexibility and efficiency in department operations. COVERAGE This policy applies to the purchases of all departments and divisions within the City of Oconomowoc and to purchases made with all funding sources (tax levy, state aid, user fees, utility rates, donations, etc). The provisions of Wisconsin Statutes 62.15 apply to procurement of public construction and take precedence over any portion of this policy that may conflict with that statute. More restrictive procurement procedures required by grants, aids, or other external requirements of funding sources will take precedence. GOALS o Encourage open and free competition to the greatest extent possible o Receive maximum value and benefits for each public dollar spent o Define authority for the purchasing function o Provide increased public confidence in procedures followed in public purchasing ETHICAL STANDARDS All procurement shall comply with applicable federal, state and local laws, regulations, policies and procedures. The City will make every effort to obtain high quality goods and services at the best possible price. All procurement procedures will be conducted in a fair and impartial manner. No employee or official shall participate in the selection, award or administration of a contract if a conflict of interest would be involved. No employee or official shall solicit or accept favors, gratuities, or gifts of monetary value from any person or business seeking to obtain contractual or other business with the City. GENERAL The procurement process shall be determined by several factors including item or service purchased, dollar amount, and whether the item is identified within the adopted budget. Specifics are discussed in detail within this policy. The City shall practice due diligence and reasonable effort in all purchasing activities to compare products, brands, vendors, and services that will meet the City’s needs. In general, the lowest quote should be considered for procurements. However, price is not the sole consideration. Awards shall be made only to responsible vendors that possess the potential ability to perform successfully under the terms and conditions of the proposed procurement and sell products or services that meet the specifications of the City. It is the desire of the City to purchase locally when possible. This can be accomplished by ensuring that local vendors are included in the competitive solicitation process. 3 5 By law (WI Stat 62.15 (12)), the Mayor and City Clerk sign construction contracts on behalf of the City. However, the Council herby delegates the authority to approve and sign contracts to the applicable Department Head and/or City Administrator in accordance with the thresholds set forth in this policy. When Council Committee or Council approval is required the Mayor and Clerk shall sign such contracts. When the City enters into a contract, the contract should assure that the City’s potential liabilities and exposures are properly and reasonably protected. Insurance requirements may vary by project but in general the City requires the contractor to maintain valid insurance coverage including workers compensation and liability. Insurance requirements for contracts should be set by the City Attorney and reviewed by the Department Head for compliance. The City is exempt from state sales and use tax. The City is also exempt from federal excise taxes on fuel. Those making purchases are responsible for ensuring tax is not paid. A sales and use tax exemption certificate is available from the Finance Department. The City participates in a Purchasing Card Program which provides an alternative method of payment for purchasing items. There is a separate Purchasing Card Policy with guidelines for cardholders in utilizing their card. Purchasing Cards do not replace the procurement policies and procedures established within this manual. The City has a separate Employee Training, Travel and Reimbursement Policy. The policy contains procedures and approvals specific to City employee training and travel and reimbursements. A current IRS W-9 form is required for all vendors. Departments are required to request a W-9 for any new vendors prior to invoices being sent to Accounts Payable. This information is needed for end of year reporting to the IRS and Wisconsin Department of Revenue. The City will not be responsible or liable for any expenditure or agreement for expenditure made by a City employee, City official, or an employee of any department utilizing public funds who fails to follow this purchasing policy and procedures. 4 6 II. PROCUREMENT CATEGORIES There are four main categories of procurement – goods, general services, professional services, and public construction. 1. GOODS Goods are typically tangible items such as equipment, office supplies, general operating supplies, furnishings, vehicles, capital equipment, technology equipment, electric inventory, and other materials and consumable goods. The rental or leasing of goods is considered to fall within this category and the cost shall be determined by the total annual cost. Technology equipment (computer hardware/software, phones, audiovisual equip, copiers etc.) are to be purchased using a centralized process coordinated by the Technology Department. Purchasing thresholds apply to aggregate purchases. For example, purchase of 20 computers for $1,000 each, the aggregate price is $20,000. Purchase may not be split to avoid following threshold requirements. For monthly purchases of the same specific item (i.e. road salt, chemicals, gasoline) the annual purchase cost should be used when evaluating thresholds requirements. The City understands based on need an item may be purchased in smaller quantity or larger quantity, thereby having the same item fall within different thresholds at certain points. Best judgement should be exercised by department heads and be evaluated on a case by case basis with the Finance Department. 2. GENERAL SERVICES General services are standardized services differentiated mainly by price rather than professional qualifications. Work is often more manual, routine and operational in nature and the results are generally the same each time regardless of the vendor. Services may be obtained through a contract or case by case basis. Examples include janitorial, snow removal, delivery, refuse and recycling collection, elevator maintenance, and biosolids hauling. Agreements for maintenance of goods during ownership such as copy machine contracts or elevator maintenance are considered general services. Purchasing thresholds apply to the total actual cost. For example, monthly janitorial services should be evaluated on the total annual cost. Multi-year contracts should be evaluated on the total annual contract cost. 3. PROFESSIONAL SERVICES Professional Services is defined as consulting and expert services which are highly customized and differentiated on factors other than price, such as professional competence, expertise and experience. Professional services are often performed by licensed individuals. Examples include attorneys, engineers, accountants/auditors, appraiser, financial and economic advisors, architect, planning, design, professional consulting and professional studies. Multi-year contracts should be evaluated on the total annual contract cost. 5 7 ON GOING PROFESSIONAL SERVICES Professionals are sometimes retained for their expertise on an as needed basis to serve in an advisory role to the City vs. being retained for a specific project. In December of each year the Finance Department shall bring to Council a list of individuals/firms which they desire to retain on an as needed basis for the following year for services which are included within the adopted budget and expected to exceed an annual cost of $25,000. On-going professional services which have been approved by Council do not require a purchase order. On-going professional services included within the budget but not expected to exceed an annual cost of $25,000 shall follow the approval thresholds established on page 9. 4. PUBLIC CONSTRUCTION Public Construction is the construction of public buildings, bridges, streets, highways and other similar public improvement involving City land, building or infrastructure. Examples include annual street maintenance, parking lots, storm sewer, utility infrastructure, construction of new buildings or park shelters, tennis court resurfacing, crack sealing program, and HVAC upgrades. The provisions of Wisconsin Statues 62.15 apply to procurements involving public construction. The statute requires the City to competitively bid all public construction projects when the estimated cost of the project exceeds $25,000. Per Wis 62.15 when the estimated cost exceeds $5,000 but is not greater than $25,000 the Director of Public Works shall give a Class 1 notice under Chapter 985 Wisconsin Statues of the intent to enter into a contract for the proposed construction before the contract is executed. 6 8 III. PROCUREMENT REQUIREMENTS Procurement requirements are in place to encourage open and free competition, receive maximum value and benefits for every public dollar spent, and provide public confidence in procurement procedures. Procurement thresholds apply regardless if item is identified in the adopted budget and regardless of funding source. See descriptions and thresholds outlined below. TABLE A - Procurement Requirements Goods General Professional Public Purchase Services Services Construction Order Needed < $5,000 Non-competitive using best judgement. Quotes strongly encouraged No but not required. $5,000 - $10,000 Two quotes – informal solicitations or request for bid/proposals. No Written documentation required. $10,000 - $25,000 Three quotes – Three quotes – informal solicitations or request for informal bid/proposals. Written documentation required. Yes solicitations or request for > $25,000 bid/proposals. Request for Proposal Public Bid Written per Wis 62.15 documentation Qualifications Based Selection for Yes required. Professional Services Exceptions Some exceptions apply. See section VI. Exceptions on page 11 No 1. NON-COMPETITIVE Procurement made without any formal competitive vendor selection process as a result of the low dollar threshold of purchase. Competitive quotes/vendor comparison is encouraged but not required. 2. COMPETITIVE Procurements exceeding a certain dollar amount therefore requiring multiple quotes. This ensures the City is obtaining the maximum value. A. Informal Quote Solicitations – Directly contacting prospective vendors via phone call, email, website inquiry, in-person etc. Quotes may be written or verbal but need to be documented in either case. When verbal quotes are received all pertinent details should be written by the department and retained on file. B. Request for Bid – A formal request to prospective vendors which incorporates a bid document containing specifications and scope of work. Vendors are evaluated mainly on cost, provided they are qualified and able to meet specifications. Request for Bids may be sent directly to vendors and/or 7 9  publicly advertised. Advertisements may include the City’s official newspaper, City website, trade publications or websites, or any known avenue in which qualified vendors are likely to view. C. Request for Proposal – A formal request to prospective vendors for general and professional services. The request shall detail out specifications and scope of work. General Service – Proposals are evaluated mainly on price, provided vendor is qualified and shows the ability to meet the City specifications. Professional Service – Proposals are evaluated using a Qualifications Based Selection process. Technical ability and professional competence play an important factor. The City will take into consideration demonstrated competence, knowledge, scope of services, and cost. Based upon the service or project a selection committee is advisable. Criteria will be established, and responses scored using a number ranking that first evaluates technical requirements and then evaluates cost. Advertisements may include the City’s official newspaper, City website, trade publications or websites, or any known avenue in which qualified vendors are likely to view. D. Public Bid – A competitive process per Wisconsin Statute 62.15 incorporating a bid document containing specifications and scope of work. Bids are to be sealed and provided to the Clerk’s office and opened at a specific time and place. Required to be advertised. Advertisements may include the City’s official newspaper, City website, trade publications or websites, or any known avenue in which the qualified vendors are likely to view. 3. SOLE SOURCE The City recognizes that a competitive process for vendor selection is not applicable to every situation. Departments are responsible for providing appropriate research and documentation that the vendor selected is truly a sole source. Sole source purchases are allowed in the following circumstances. A. The item is being purchased through a cooperative arrangement such as the VALUE group, State bid list, State of Wisconsin VenderNet or WPPI Joint Purchasing. Competitive process is deemed to have already been completed by the cooperative arrangement. B. The item is deemed to be vendor specific because an alternative product or manufacturer would not be compatible with current products resulting in additional operating or maintenance costs. C. Standardization of a specific product or manufacturer results in more efficient and economical operations. D. After competitive procurement solicitations the competition is determined to be inadequate. E. The item or service is highly specialized and only available from a single source. F. The purchase is from another governmental body. Unless specifically noted in section VI. Exceptions on page 11, Sole Source purchases greater than $10,000 require purchase orders. 8 10 IV. PROCUREMENT APPROVALS Procurement approval requirements are in place to define who has the authority to make and approve purchases. Thresholds apply regardless of funding source and procurement method used to acquire the good or service. Each Department Head is authorized to delegate authority up to $5,000 to an employee of that department to make and approve purchases. The Department Head must file written notice with the Finance Department of the individual(s) whom this authority has been assigned. If the Department Head is absent and the purchase is over $5,000, then the Finance Director or City Administrator is authorized to approve the purchase. When evaluating approval requirements, multi-year contracts should be evaluated on the total annual cost. TABLE B – Procurement Approvals Identified in Adopted Budgeted Not Budgeted or Over Budget General Services General Services Goods Professional Services Goods Professional Services Public Construction Public Construction < $5,000 Department Head or Designee Department Head $5,000 - $10,000 Department Head Department Head and City Administrator $10,000 - $25,000 Department Head and Finance Director Council Committee, Department Head and City Administrator > $25,000 Department Common Council, Common Council, Department Head Head and Department Head, and and City Administrator Finance City Administrator Director Refer to Section V. Use of Purchase Orders on page 10 for Approval process Over Budget If the item is identified within the budget but exceeds the budgeted amount, the amount in excess of budget shall dictate the additional approval threshold. For example, if an item is identified at $10,000 but the total cost is $11,000 the excess is $1,000 and requires Department Head Approval. Departments are responsible for ensuring and documenting that funds are available within their department budget to cover the excess amount. Utility Inventory Inventory purchases are made for approved utility capital and maintenance infrastructure projects, developer capital projects and stock items (i.e street light poles and fixtures). Utility inventory is unique in that it is not identified within the adopted budget. Rather inventory is recorded as an asset on the balance sheet and expensed at the time of use. The Utility Operations Manager is responsible for the oversight and coordination of utility inventory purchases. Quotes shall be solicited as outlined within the Procurement Requirements on page 7. For operational efficiency purposes procurements greater than $10,000 but less than $25,000 require Department Head and Finance Director approval, and procurements greater than $25,000 require Department Head, Finance Director, and City Administrator approval. 9 11 V. USE OF PURCHASE ORDERS Purchase Orders exist as a method of tracking procurements $10,000 or greater. They provide an opportunity to review and document within the Accounting System the procurement method used, vendor selection process, how an item/service is being funded, within budget or over budget, and approvals. For procurements greater than $10,000 departments shall review the approval thresholds established on page 9. If Committee or Council approval is required, this shall be obtained prior to initiating any purchase order. Purchase orders shall be initiated by the department and move through an electronic workflow/approval path. The purchase order shall be routed to the Finance Director and if required, City Administrator for review and approval in accordance with the thresholds established on page 9. Procedures o Purchase Orders are required to be done PRIOR to obtaining a good or service. o Purchase order policies apply regardless of procurement method, regardless of funding source, and regardless if item is within or over budget. o Total annual cost should be used when determining if a purchase order is required. o When an item is over budget the total actual cost should be used. o For multi-year contracts, a new purchase order should be done each year. Purchase Order Required Goods ≥ $10,000 General Services Professional Services Public Construction See Section VI. Exceptions on page 11 for exceptions to the purchase order policy. Payment of Invoices on Purchase Orders Department Heads shall be responsible for managing payments on purchase orders, submitting change orders as needed, and ensuring the purchase order is not exceeded. Therefore, Department Heads are required to approve ALL payments on a purchase order, regardless of dollar amount. For example, a payment of $2,000, although otherwise may be delegated to department staff for approval, if on a purchase order this must be approved by the Department Head. 10 12 VI. EXCEPTIONS For operational efficiency purposes certain payments are not subject to the provisions of this policy. This is due to the nature of the payment such as a pass-through payment (tax refunds, chargebacks), a legal requirement (FICA, lawsuit settlement), or sole source provider (WPPI power purchase). Competitive procurement methods and purchase orders are not required. Approval is required by the Department Head responsible. In accordance with the guidelines on page 9 Department Head may delegate approval of payments under $5,000 to department staff (i.e monthly utility payments). Exceptions A. As opposed to a purchase, the item is a payment in which the City is not directly receiving a good or service, such as refunds, pass-through payments, and donations to other parties. B. Monthly utilities including electricity, water, gas, internet, telephone and WPPI power purchase. C. Maintenance agreements and software support for items that have already been approved and purchased. D. Insurance claim or settlement payments. E. Purchase of and costs related to the acquisition of real property such as appraisals and closing costs. F. Payments on approved contracts that fluctuate based on activity in which a specific dollar amount cannot be determined. (Contract itself requires a competitive procurement process but the payments do not require a purchase order). G. Sole source purchases from governmental entities. H. Payments for services to non-employee appointed officials. Other exceptions may apply and shall be evaluated on a case by case basis with the Finance Director or City Administrator. 11 13 VII. CHANGE ORDER PROCESS The City recognizes that changes may periodically occur to quantity or scope of work for purchases previously approved. The process will vary depending on type of procurement, original dollar amount, and dollar amount of change. For previously approved procurements and previously issued purchase orders the following guidelines apply. Change Orders Changes less than 10% of the original amount do not require a change to the Goods purchase order. Payment requires approval by the Department Head and may be paid against the original PO. Changes in excess of 10% of the original amount require a change order to the purchase order. Approval required by Department Head and City Administrator via the PO Change Order process. Changes Orders that cause item to exceed budget shall follow the approval thresholds established on page 9. General Services Changes less than 10% of original amount do not require a change to the and Professional purchase order. Payment requires approval by the Department Head and may Services be paid against the original PO. Original Amount is < $25,000 Changes in excess of 10% require approval by Department Head and City Administrator via the PO Change Order process and shall follow the Approval thresholds established on page 9. Original Amount is > $25,000 Changes in excess of 10% require a change order to the purchase order. Approval is required by Common Council, Department Head, and City Administrator. Public Any contract change orders, regardless of dollar amount, require a change to Construction the purchase order. Approval required by Department Head and City Administrator via the PO Change Order process. Original Amount is > $25,000 Changes in excess of 10% require approval by Common Council, Department Head, and City Administrator. 12 14 VIII. ROLES AND RESPONSIBILITIES City Council  Establish overall policies to ensure the integrity of the Purchasing Program throughout the City  Approve Public Construction contracts > $25,000  Approve Professional Service contracts > $25,000  Approve General Service contracts > $25,000  Approve Changes Orders which exceed original 10% contract contingency for contracts over $25,000  Approve any item or service > $25,000 that is not budgeted or over budget City Administrator  Ensure policies and procedures are followed  Approve all purchases that are unbudgeted or greater than $5,000 over budget  Approve Change Orders  Approve utility inventory purchases > $25,000  Review and approve Request for Proposals and Request for Bids prior to issuance Finance Director  Supervise and enforce the procurement policy  Coordinate the RFP process with Department Heads  Review and approve Purchase Orders  Approve budgeted purchases > $10,000  Approve utility inventory purchases up to $25,000 Department Head  Ensure integrity of purchasing within department by upholding City policies and procedures  Maintain knowledge of policy and procedure to effectively oversee activity within department  Establish approval thresholds for staff; designate staff to coordinate day to day activity  Determine which vendor and method of procurement provides the City with products and services at the best value  Manage and oversee vendor solicitation process including formal request for quotes/bids  Present bid results and contracts to Council  Review and approve requisitions as part of the purchasing process  Approve purchases over $5,000  Approve all invoices on a purchase order regardless of dollar amount Finance Department  Monitor compliance with procurement policies and procedures  Process purchase requisitions  Serve as a resource for departments in end user training and procedures  Overall day to day accounts payable processing  Administrating the City’s pcard program Department Designee  Conduct business in accordance with the principles contained in the purchasing policy  Solicit quotes as needed  Coordinate day to day invoice processing  Make pcard payments and approve invoices up to $5,000 13 15 IX. EMERGENCY Emergency An emergency purchase is one in which a situation exists where there is a threat to life or property, public health, welfare, or safety that does not allow time for normal competitive purchasing procedures. Examples include flooding, natural disasters (i.e. collapsed sewer main) and civil unrest. The City Administrator shall make such determination and authorize the emergency purchase. If the City Administrator is not immediately available, the Finance Director or Police Chief may authorize an emergency purchase. Critical Need The City recognizes from time to time occasions may arise which do not meet the definition of an emergency, but instead dictate immediate action in order to prevent disruption of operations and negatively impact the City’s ability to serve the public. Examples include plant equipment or heavy machinery (i.e. plow truck) breaking without any warning. The City Administrator shall make such determination and authorize the critical purchase. Such procurements shall be made with as much competition as is practical under the circumstances. 14 16