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					                                                                  POLICY NO: DCS 12 - CL




                          PROCUREMENT POLICY




Date Resolved by Council:                          8 December 2010

Commencement Date:                                 8 December 2010

Review Date:                                       January 2012

Revocation Date:                                   30 June 2012

Responsible Department:                            Corporate Services




This policy has been authorised and is included on Council‟s Website.




                                                     Peter Brown
                                                     Chief Executive Officer

                                                     8 December 2010
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                           PROCUREMENT POLICY
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1.   PURPOSE

     To comply with the Local Government Act 1989 section 186A and in accordance with
     the Local Government (Best Value Principles) Act 1999 and good governance practice,
     this policy includes guidance for all Council procurement activities.


2.   OBJECTIVE

     To provide a framework that ensures Moreland City Council‟s purchasing, tendering
     and contract management procedures and processes are undertaken in a manner
     conversant with occupational health & safety, risk management practices, relevant
     legislation, purchasing principles and Council‟s corporate objectives.

     To ensure that a Council wide consistent approach to procurement includes best value
     for money, good management practices, legislative compliance, transparency, probity
     and considers impacts to the environment and human health, and that procurement
     activities are integrated with other relevant Council systems, processes and programs.


3.   BACKGROUND

     This policy applies to all Councillors, employees of Moreland City Council and to any
     external entity overseeing, or having any involvement in, the procurement of goods and
     services for Council. As provided in the Councillors‟ Code of Conduct, all requests by
     Councillors for information, and approaches to staff with regard to procurement matters
     must be directed to the Chief Executive Officer, Directors as nominated or the Contract
     Support Unit.

     The Procurement Policy is designed to ensure that expenditure of public funds results
     in the best cost/value ratio. To ensure this goal is achieved, the policy outlines
     approved parameters within which all goods and services must be obtained.

     This Policy is not designed to cover all related matters. Further detail can be obtained
     by reading:

         Moreland City Council Purchasing Guidelines

         Moreland City Council Tendering and Contract Management Guidelines

         Moreland City Council Procurement Process Flowcharts

         Councillors Code of Conduct

         The Moreland Way for employees and supervisors

     The Contract Support Unit provides the central resource for purchasing, tendering and
     contract management administration, guidance, advice and training and maintains the
     purchasing and subcontract management component of the JD Edward Financial and
     Business System (JDE) and the eValua etendering system to ensure consistency and
     adherence to legislation. A significant component of the operational purchasing function
     is devolved to individual Council service areas.


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     Related policies and statutory requirements of the State or Commonwealth
     governments:

         Local Government Act 1989 Section 186 and Section 186A

         Local Government (Best Value Principles) Act 1999

         Local Government Regulations 2004

         Local Government Finance Regulations 2004

         Trade Practices Act 1974

         Competition Code

         Fair Trading Act

         National Competition Policy

         Occupational Health and Safety Act 2004

         Victorian Charter of Human Rights

         Commonwealth Disability Discrimination Act 1992

         Privacy Act 1988

     Related Moreland City Council policies

        MoreSafe


4.   PRINCIPLES GOVERNING PROCUREMENT PRACTICE

     4.1. Open and Effective Competition

          Council will actively encourage competition in an endeavour to achieve the best
          cost/value ratio per dollar spent. Council will give fair and equitable consideration
          to all prospective offers and prospective suppliers wishing to do business with
          Council will be given a reasonable opportunity to do so.

     4.2. Ethical Behaviour and Fair Dealing

          All Council Officers and Councillors, when purchasing goods and services will act
          impartially, will advance the interests of the Council and maintain a high level of
          professionalism, confidentiality, probity and accountability.




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        Councillors and Officers shall not participate in any action or matter associated
        with the arrangement of a contract where that person or any member of their
        immediate family has a significant interest, or holds a position of influence or
        power in a business undertaking tendering or work. The onus is on the Councillor
        or Officer being alert to the potential conflict and promptly declaring any actual or
        potential conflicts. This is normally recorded via the Conflict of Interest
        Declaration.

        All officers involved in the development or assessment of a tender are to
        complete a conflict of interest declaration. All relationships, circumstances or
        events that may create a perception of a conflict of interest are to be declared,
        and where necessary, controls put in place. These declarations must be updated
        if circumstances change.

    4.3. Value for Money

        Council will use public funds to ensure that the best return and performance is
        achieved. This will be achieved by using prudent evaluation methodologies and
        techniques and made on the basis of value for money rather than just cheapest
        up-front cost. The procurement value is to be based on both the full life cycle and
        Total Cost of Ownership such as procurement cost, maintenance costs,
        operational costs, and environmentally friendly disposal costs at the end of the
        product‟s useful life. A „whole of life‟ calculation will be used i.e.: all known costs
        plus all amounts representing a reasonable calculation of any likely costs and
        charges based on market or technical expectations. For example, where an
        agreement may lead to non-routine charges (i.e.: maintenance, freight or
        upgrades) the expected costs of these charges is to be included in the
        procurement value calculation.

    4.4. Encouragement of the Development of Competitive Local Business and
         Industry

        Council recognises the need to support local industry. Potential suppliers will be
        given fair and equitable consideration. To encourage local industry, Council will
        actively seek offers from local suppliers where appropriate. Contract evaluation
        techniques are designed to obtain the best prices/value available. Where
        appropriate, local suppliers will be given preference through fair and equitable
        evaluation.

    4.5. Risk Management

        Risk management is an integral part of best practice in procurement. Risk
        management is the method of establishing the context, identifying, analysing,
        evaluating, treating, monitoring and communicating risks associated with any
        activity or process to enable Council to minimise losses and maximize
        opportunities. Identifying risks early and selecting the best option for managing
        those risks helps Council to achieve favourable outcomes.




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         Procurement risk factors include, but are not limited to, fraud, waste, abuse,
         vendor performance, contract security, poor specification of need, public relations
         and administrative burden. All staff have a responsibility to manage the risk
         associated with procurement. It is important that all staff intending to procure
         goods and/or services undertake a level of risk assessment; the Procurement
         Risk Management Tool provides the preferred method.

         All contractors/vendors supplying goods, services and works to Council must
         demonstrate specific understanding of the health and safety requirements of the
         work to be performed as well as provide evidence of appropriate insurances, risk
         management practices and other measures as deemed appropriate.

    4.6. Continuous Improvement

         All procurement activities will be integrated with other relevant systems and
         programs within Council and developed in line with Best Practice principles.

    4.7. Authority Levels

         Purchasing Methods (Amounts Ex GST). Procurement Approval limits as follows:

                                                             Staff
             Council      Purchasing and         Petty                        Purchase
                                                         Reimbursemen
             Officer        Contracts            Cash                       Without Order
                                                              ts

             Council             N/A             N/A            N/A               N/A

              CEO             $500,000           $100        $5,000+           *$100,000

             Director         $250,000           $100         $5,000            $10,000

                        As appropriate to role
             Manager      and approved by        $50           $500             $5,000
                               CEO

          Approved      As appropriate to role
            Unit          and approved by        $50           $500             $1,000
          Managers             CEO

    Notes:

    Manager Finance has unlimited delegation in JDE to enable the processing of
    transactions that have been approved by Council and is for administrative purposes
    only.

    * When exercising the delegation for purchase without order by the CEO of sums
    between $50,000 and $100,000, these transactions are to be reported to the next
    council meeting following the purchase.




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    4.8. Authority to Purchase

         The Moreland business system (JDE) is the tool provided to purchase goods and
         services. The use of non-JDE purchasing tools (i.e.: Purchase without order,
         direct debit, deductions through Accounts Payable, petty cash and staff
         reimbursements) is restricted to situations where a clearly demonstrable need
         exists. Authorisation is required prior to entering into a contract, purchase order
         or other purchasing arrangement. No agreement to legally bind Council into the
         purchase of goods or services shall be made without the express permission of
         the appropriate authorising officer in accordance with the policy. „Verbal‟
         approvals or arrangements contrary to policy are unacceptable.

         Prior to requesting authorisation, all relevant actions must have been taken
         including:

             Ensuring the supply is necessary and in the best interests of Council.

             Ensuring that a budget is available for the supply and that uncommitted
              funds are available for the supply.

             Ensuring that the correct account coding has been applied.

             Ensuring that quotes and procurement documentation are to be in order.

             Attempting to use an approved vendor or an existing supplier.

             Ensuring that the goods or services are appropriate to the need for which
              they are to be acquired.

         No contract form, including purchase orders, shall be used other than those
         approved by the Contract Support Unit.

    4.9. Direct Debit

         Direct debit payments are for special circumstances only and include items such
         as superannuation payments.

    4.10. Direct deductions through Accounts Payable

         These include liabilities such as tax, utilities, insurance and payroll deductions.
         This type of procurement can be arranged through Finance and must be
         approved by the Manager Finance and Business Systems.

    4.11. Petty Cash

         Petty Cash purchases are only to be used for minor and urgent (pressing and
         calling for immediate attention) purchases. Officers seeking to use petty cash
         must be able to demonstrate that a purchase order could not be used. Advice
         should be sought from the Contract Support Unit in the first instance.




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    4.12. Public Transport

         Council staff are encouraged to use sustainable transport options - either a
         Council pool car or public transport wherever possible. Cab Charge vouchers are
         available to staff with prior approval when alternative options are not available.
         As councillors do not have access to pool vehicles they are to be provided with a
         Cab Charge card for this purpose.

    4.13. Staff Reimbursements

         This method of procurement is to be used in exceptional circumstances and for
         incidental purchases only or where conditions are set out in employment
         contracts.

         Staff reimbursements will be returned to staff unpaid:

              If the supplier / or a suitable alternative supplier is on the JDE system and a
               purchase order could have been raised.

              If the goods/services purchased did not have prior approval

              If the purchase of goods is for catering purposes or for Council assets.

    4.14. Credit Cards

         Corporate credit cards are to be used in accordance with Council‟s Credit Card
         Usage Policy. A limited number of credit cards will be issued across Council.
         Private credit cards may only be used in extreme circumstances and will be
         subjected to the above staff reimbursements.

         Officers are not to use private credit cards without prior approval and the use of
         private credit cards to avoid the procurement and delegation levels is not
         permitted.

    4.15. Terms of Trade

         Council will pay creditors on the following terms:

              Less than 30 days after both the supplies have been delivered and the
               invoice has been correctly rendered to the Accounts Payable area. The
               invoice received from the supplier must show the appropriate Council
               purchase order number or it will be returned to the supplier.

              In accordance with the contract terms, where a contract exists.

              Within 10 working days in accordance with Building and Construction
               Industry Security of Payment Act 2002 where it applies.

         This policy overrides any payment terms requested by suppliers. Any variation to
         this policy timeline must be authorised by the CEO. Where a supplier offers a
         discount for prompt payment, the request for early payment must be discussed
         with Finance Branch who will calculate the effect (cash flow and opportunity

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         costs) and inform the requesting officer to accept or reject the offer.




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    4.16. Quotation Requirements

         Prior to entering financial or commercial transactions, officers are required to test
         the market in open competition and to ensure that Council is deriving best value
         from the transaction. All quotations must be recorded.

         A formal risk appraisal, at minimum using the procurement risk tool, must be
         conducted for all purchases over $30,000 (and over $2000 where risks are
         evident). Staff are unable to assess risk as “low” unless they have attended
         training in risk assessment and tendering.

             Requirement (unless covered by        Low Risk       Medium         High Risk
             an existing contract)                                Risk
             One verbal quote                        <$5000         <$5,000         <$2,000
             One written quote                       $5,000>
                                                     $30,000
             Three written quotes using             $30,000>        $5,000>         $2,000>
             standard purchase order terms          $100,000        $50,000         $10,000
             or industry contracts (RFQ) or
             Moreland contract
             Formal tender, can be confined        $100,000>       $50,000>        $10,000>
             (Select Tender)                        $150,000       $150,000        $150,000
             Open public tender                    >$150,000      >$150,000       >$150,000
                                                   ($200,000      ($200,000      ($200,000 for
                                                   for works)     for works)        works)


         Note:         Where it has been identified that there will be a large response to a
                       public tender an Expression of Interest (EOI) may be used to shortlist
                       potential tenderers.

         All transactions requiring a formal or public tender must have a contract. It is
         recommended that medium and high risk activities where three written quotes are
         obtained consider whether a contract would further reduce the risk and act
         accordingly.

         Contracts are to be fully valued over the life of the contract and not split into
         smaller amounts to avoid authorisation or tender processes. Splitting an order
         includes:

                Breaking the supply into a number of vendors.

                Receiving lower value invoices over a period of time (invoice splitting).

                Separating the supply into components and separately tendering (e.g. the
                 purchase costs and the maintenance costs of software).




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              Calculating the cost of a relationship over a small timeframe rather than the
               entire contract length (e.g. a monthly or annual fee rather than the life of the
               contract).

              Entering into many short time frame contracts to obscure the true and
               appropriate contract length.

              Breaking the supply into components that avoid the accurate evaluation of
               risk.

              Any other action taken to reduce the apparent authority required by
               misrepresenting the supply, the value, the term or any contract condition.

         Where an agreement may lead to non-routine charges (e.g. security alarm
         responses), the value of the contract is to be based on all known costs plus an
         amount representing a reasonable calculation of the likely charges based on
         market or technical expectations.

         Council officers are not to enter into a supply arrangement without knowing the
         value of the procurement. Where doubt legitimately exists about the likely
         obligation, a professional estimation of the likely obligation is to be made. It is not
         acceptable to knowingly or otherwise misrepresent the nature or value of a
         purchase or contract. Where doubt exists, advice is to be sought from the
         Contract Support Unit.

    4.17. Preferred Supplier Contracts

         Preferred Supplier Contract (PSC) is an agreement to deal with a panel of
         suppliers after a competitive process has occurred, therefore, a PSC must be
         used when one exists. Seeking supplies from vendors specifically excluded from
         a PSC may amount to a breach of contract, so it is only to occur when there is
         clear and demonstrable evidence of inability of a PSC to deliver the supply
         required.

         Clear and demonstrable reasons may include inability to meet timeframes,
         inability to provide the exact product needed, or inability to meet quality
         requirements at that time. On rare occasions price may indicate the PSC does
         not provide the best value outcome, however other factors would need to be
         assessed with price. The Manager Finance and Business Systems and Unit
         Manager Contract Support are to assess the evidence and approve any
         procurement outside the PSC.

    4.18. Confined Procurement

         There are circumstances whereby staff can confine procurement to a particular
         supplier. This is a rare occurrence and should be undertaken with great care.
         Approval to restrict procurement must be obtained prior from both the Unit
         Manager Contract Support and also the Manager of Finance and Business
         Systems. Confining procurement will only be considered where purchases are
         less than $150,000 for goods and services or $200,000 for works.



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         The following circumstances must apply:

             Where there is only one supplier that can provide the specialist
              goods/services being sought
         or

             Where it is positively in Council‟s best interests.

    4.19. Evaluations

         The Evaluation Team for formal tenders must comprise of at least 2 officers and
         for public tenders (purchases above $150K) at least 3 officers, one being a
         member of an “independent” Branch. The risk evaluation and quote/tender
         evaluation matrix must be stored in the Trim document management system
         against the allocated contract or quotation number. The evaluation report and
         recommendation is to be approved by the Manager, Director, Chief Executive
         Officer or Council in accordance with delegated authority.

         Offers will be evaluated using evaluation criteria and weightings. Criteria may
         include (but is not restricted to) price, experience, capability, resources, social
         issues, sustainability, and local content. Once the Offer has been evaluated,
         where appropriate, local suppliers can be given preference on price. Council
         employees and Councillors are not to approach or discuss offers with tendering
         suppliers during the evaluation period. The officers nominated in the Conditions
         of Contract may request clarification of the Offer received.

    4.20. Contract Documentation

         The Contract Support Unit will maintain templates of all relevant documents and a
         matrix advising which documents to use in each circumstance.

    4.21. Critical or Emergency Incident

         In recognition that full compliance with existing Council purchasing procedures
         may not support the Council‟s needs during a critical or emergency incident, an
         alternative procurement process may operate during the incident. This alternative
         process aims to accommodate urgent procurement needs, while ensuring that the
         procurement process adopted is reasonable and conducted with appropriate
         consideration of standard purchasing principles and probity. The alternative
         process is to be authorised by either the CEO, Director or Manager of Finance &
         Business Systems once a critical or emergency incident has been declared.

         Such incidents are:

             A state of disaster declared under the Emergency Management Act 1986,
              or any other emergency declaration made by the State‟s Premier under an
              enactment;

             An incident declared by the Chief Executive Officer or Director where the
              safety or security of any person or property associated with the Council is
              threatened; and


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               An external incident to which the Chief Executive has authorised the
                provision of urgent support.

           Once the immediacy of the incident has passed, purchase orders should be
           raised to record the expenditure in the same way as they would have been in
           normal circumstances.

     4.22. Exemptions under the Policy

           The following areas are exempt from the terms of the policy:

               Payments with statutory/legislative requirements - eg: payments to the ATO

               Superannuation

               WorkCover

               Payroll Deductions

               Investments / Term Deposits

               Sundry Refunds (eg: pension rate rebates, deceased animal refunds)

               Payments under the Building and Construction Industry Security of
                Payments Act

               Metropolitan Fire Brigade Levies

               Property Purchases

               Utilities

               Warranty Renewals

               Leases

               Contracts with special payments terms


     4.23. Buy Australian

           In accordance with Section 186(3) of the Local Government Act 1989, Council
           gives preference to goods, equipment, material or machinery manufactured in
           Australia and New Zealand whenever practicable.

           Clothing purchases for staff will be assessed with preference for companies
           accredited via Ethical Clothing Australia where Australian manufactured clothing
           is being purchased.

         Preference will be given to the purchase of food and drinks that are organic,
         preferably locally produced, or if not locally produced, certified fair trade where
         available and up to a cost premium of 5 %. Organic and fair trade products are to
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         be           considered         in          food          tenders.




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    4.24. Sustainable Purchasing

         Council is committed to reducing its environmental impacts and operating in a
         socially and environmentally responsible manner. Council will encourage the
         design and use of products and services that have been produced to ethical
         standards, which have minimal impact on the environment and human health.
         This includes, but is not limited to:

             Waste management;

             Recycling;

             Energy management;

             Emissions management;

             Water conservation;

             Green building design; and

             Environmentally sustainable procurement.

         Where applicable, evaluations will include whole of life analysis and consider the
         following criteria:

         Avoid Waste

             Avoid the unnecessary purchase of goods, services or works by identifying
              ways to carry out a function or task without generating waste (e.g. sending
              information via TRIM instead of paper hard copy) and checking stores and
              other departments for excess goods.

             Select products with no or minimal packaging.

             Seek to reuse items where possible and extend the useful life of products
              and equipment through maintenance and repair or reallocation.

             Commit to buying goods with recycled content to stimulate demand for
              recycled materials and increase the market for recycled content goods.

         Minimise Greenhouse Gas Emissions

             Purchase energy and fuel efficient products (preferably with an Energy Star
              Rating of 4 or higher).

             In addition to the energy and water consumption of a product during its
              operation, give consideration to the energy and water requirements of a
              product during its production, transportation and eventual disposal.

             Purchase renewable energy and reduce the purchase of fossil fuels.


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            Purchase goods that have not travelled long distances.

            Purchase goods that are carbon neutral.

        Minimise Habitat Destruction

            Purchase paper and wood products obtained from recycled, certified
             plantation, salvaged or renewable sources.

            Purchase products that reduce or eliminate the use of toxic chemicals.

            Purchase products that carry independently reviewed certification (e.g.
             Forest Stewardship Council, Good Environmental Choice Australia).

            Avoid purchasing products that contain Palm Oil, unless certified plantation
             palm oil.

        Minimise Toxicity

            Purchase materials and products that are not made from toxic or polluting
             substances e.g. carpets, building materials.

            Purchase products and materials that will not release toxic substances that
             can affect human health and pollute water, air or land at any stage of their
             life cycle.

            Avoid products containing hazardous materials like Lead (Pb) and Mercury
             (Hg).

            Purchase cleaning products that are Ph neutral, free from irritants,
             carcinogens, endocrine disruptors, VOCs, toxicants and scheduled poisons
             (S5, S6 or S7)

        Maximise Water Efficiency

            Purchase products that have the best water rating for the price (preferably 4
             star or higher) and conserve water or use water in an efficient way.

        Minimise Soil Degradation

            Purchase products, materials and services that will not degrade or pollute
             the soil or result in erosion through their use.

        Green the Supply Chain

            Potential suppliers must meet green criteria in tender documents

            Potential suppliers must provide evidence of their environmental
             sustainability policies / plans / practices, including if they are ISO14001
             certified


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              Purchase products that achieve certification in the major 3rd party eco-
               labelling schemes

              Purchase products that have accurate and non-deceptive labels

         To assist in the development of Council‟s Sustainable Purchasing Program
         Council will continue to remain a member of ECO Buy

    4.25. Administration of the Policy

         The Contract Support Unit is responsible for the administration of this policy and
         has no authority to waive the policy without the expressed authority of the CEO or
         Council as appropriate. The Contract Support Unit will maintain procurement
         procedures and instructions to support this Procurement Policy and provide
         support to line areas through training and presentations as required.




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