POLICY NO: DCS 12 - CL
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.
Chief Executive Officer
8 December 2010
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.
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.
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
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
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.
Related policies and statutory requirements of the State or Commonwealth
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
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
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.
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
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
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
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.
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:
Council Purchasing and Petty Purchase
Officer Contracts Cash Without Order
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
Approved As appropriate to role
Unit and approved by $50 $500 $1,000
Manager Finance has unlimited delegation in JDE to enable the processing of
transactions that have been approved by Council and is for administrative purposes
* 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.
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
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.
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
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
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
costs) and inform the requesting officer to accept or reject the offer.
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>
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
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
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
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
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).
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
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
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
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.
The following circumstances must apply:
Where there is only one supplier that can provide the specialist
goods/services being sought
Where it is positively in Council‟s best interests.
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
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
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
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
Investments / Term Deposits
Sundry Refunds (eg: pension rate rebates, deceased animal refunds)
Payments under the Building and Construction Industry Security of
Metropolitan Fire Brigade Levies
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
be considered in food tenders.
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:
Green building design; and
Environmentally sustainable procurement.
Where applicable, evaluations will include whole of life analysis and consider the
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.
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
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
Avoid products containing hazardous materials like Lead (Pb) and Mercury
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
Purchase products that achieve certification in the major 3rd party eco-
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.