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POLICY AND PROCEDURE FOR THE
PURCHASE OF GOODS AND SERVICES
Adopted: 26/10/2003 By: Chief Executive
Amended: 09/12/2004
To be reviewed: November 2006
Is the Is the Is the Is the
No No Is the
purchase less purchase in the purchase in the purchase in the
purchase $100,000
than $5,000? range $5,000- range $10,000- range $50,000-
or more?
$9,999? $49,999? $99,999?
Yes Yes Yes Yes Yes
THINGS TO REMEMBER:
Always plan ahead to allow sufficient time to carry out all steps of the purchase process.
Always put the ledger number on the order and the invoice when making payments for
goods/services under the purchase process.
If the purchase relates to a contract, always put the contract number on the invoice as
well.
PURCHASE OF GOODS AND SERVICES
1.0 GENERAL PRINCIPLES .................................................................................................. 4
1.1 Prime Objective ................................................................................................................ 4
1.2 Purchasing Processes ...................................................................................................... 4
1.3 Best Value ........................................................................................................................ 4
1.4 Occupational Health & Safety .......................................................................................... 4
1.5 Environmental Impact ....................................................................................................... 5
1.6 Quality of Goods and Services ......................................................................................... 5
1.7 Code of Ethics .................................................................................................................. 5
1.8 Emergency Procedures .................................................................................................... 5
1.9 Seeking Offers .................................................................................................................. 6
1.10 Assessment of Offers ....................................................................................................... 6
1.11 Dealing with Suppliers ...................................................................................................... 6
1.12 Methods of Purchase ....................................................................................................... 7
1.13 Purchase Orders .............................................................................................................. 7
1.14 Payment of Accounts ....................................................................................................... 7
1.15 Used Equipment ............................................................................................................... 7
1.16 Government Contracts ..................................................................................................... 7
1.17 Trade-in Policy ................................................................................................................. 8
1.18 Overseas Purchasing ....................................................................................................... 8
1.19 Goods and Services Tax (GST) ....................................................................................... 8
2.0 CASH AND CREDIT CARD PURCHASING .................................................................... 8
2.1 General ............................................................................................................................. 8
2.2 Petty Cash ........................................................................................................................ 8
2.3 Credit Cards ..................................................................................................................... 9
3.0 QUOTATIONS, TENDERS & EXPRESSIONS OF INTEREST ....................................... 9
3.1 Definitions ......................................................................................................................... 9
3.2 Exemption from Quotation Action .................................................................................. 11
3.3 Tenders and Expressions of Interest ............................................................................. 11
3.4 Public Invitation of Tenders or Expressions of Interest .................................................. 11
3.5 Tender Evaluation Committees ...................................................................................... 12
3.6 Exemption from Tender Action ....................................................................................... 12
4.0 CONTRACTS ................................................................................................................. 12
4.1 Definitions ....................................................................................................................... 12
4.2 Authority to Approve Contracts ...................................................................................... 13
4.3 Authority to Sign Purchase Orders and Contracts ......................................................... 13
4.4 Procedures ..................................................................................................................... 14
4.5 Control of Approved Forms ............................................................................................ 14
5.0 SPECIAL INSTRUCTIONS ............................................................................................ 14
5.1 Contracts for Services - Consultancies .......................................................................... 14
1.0 GENERAL PRINCIPLES
1.1 Prime Objective
The prime objective of Wirilda City Council’s purchasing policy and procedure is to
provide quality goods and services to support the functions of the Council while
obtaining value for money, minimising risks to employees, and providing transparency
in all accounting matters.
The aim is always to ensure that Best Value is obtained consistent with specified
standards of quality and service.
1.2 Purchasing Processes
Purchasing processes cost money and need to be efficient if value for money is to be
obtained overall. The most cost effective method of purchasing should be chosen for
each occasion depending on what is being bought, the value of the purchase, and the
range of potential suppliers. The resources needed to make the purchase should be
commensurate with the value, importance and complexity of the purchase.
Some indications of different levels of effort that may be appropriate, depending upon
the circumstances are:
(1) whether there is an existing government contract (for example, MAPS / CPS)
that could be used
(2) whether there are limited number of potential suppliers
(3) the quotation thresholds
(4) the transaction limit for the Wirilda City Council Credit Card
(5) the tender threshold and requirements for Tender Evaluation Committees.
Many decisions on the purchase of simple or low value items can be made on price,
as long as essential requirements are met; but more complex cases will need careful
consideration.
1.3 Best Value
In accordance with Council's commitment to Best Value, each purchase with regard to
goods and services will, dependent on the value of the purchase, be subject to
competitive quotation or tender. The evaluation of quotes or tenders will be subject to
Best Value principles.
1.4 Occupational Health and Safety
When requisitioning goods and services, employees shall observe the requirements of
the Occupational Health and Safety Act 1985.
Relevant Safety Standards applicable to specific products shall be identified and
specified. For example:
Material Safety Data Sheets are required for all chemicals purchased
Operators Manual, Noise Level Rating, etc are required for Plant and Equipment
purchases
Safety and Protective items must meet Australian Standards.
1.5 Environmental Impact
Care of our environment is of utmost importance to Council. Where practicable, when
purchasing goods and services, environmental aspects shall be identified and
considered, impacts analysed and environmental risks controlled.
1.6 Quality of Goods and Services
The level of control of any purchased product shall depend on the value of the product
and the intended output.
Products intended for purchase shall be adequately described.
Where appropriate, quality requirements shall be identified and referenced.
The evaluation and selection of suppliers shall be based upon their ability to supply
product in accordance with these requirements.
Purchased product shall be verified when received by means of an appropriate
inspection to ensure that what was received is what was requested.
1.7 Code of Ethics
Employees shall not permit themselves to be placed where they might be, or deemed
by others to be, influenced in making business decisions on grounds other than good
sound commercial judgement. They should be, and be seen to be, beyond reproach.
Employees should avoid circumstances in which the acceptance of gifts, favours or
prizes could give the appearance of conflict of interest with their official duties, or could
be interpreted as being made to secure a favour preference.
1.8 Emergency Procedures
If a repair for Health, Safety or Security needs to be effected after normal working
hours, the Responsible Officer is authorised to purchase whatever goods or services
are required to effect the repair or secure the situation until the next working day.
The Responsible Officer should use discretion as to the level of repair effected.
In any situation a Purchase Order must be completed on the next working day.
1.9 Seeking Offers
In order to obtain value for money, there must be open and effective competition, the
specification or statement of requirements and the selection criteria should be clear,
preferably performance oriented and focussing on the outcome expected rather than
specifying a particular way of satisfying the requirement, and bidders must be given
sufficient time to prepare their offers.
1.10 Assessment of Offers
Getting value for money means ensuring that benefits are commensurate with costs.
The lowest price is not necessarily the best value for money. To satisfy the objective of
obtaining value for money when procuring goods and services all staff involved in
purchasing activities, whether end-users, managers, or members of Tender Evaluation
Committee, must consider all of the price and non-price factors that are significant,
such as:
(1) quality of the product or service, including in the case of equipment,
assessment of technical factors such as design, durability and ease of
operation
(2) capacity of the bidder to meet the stated requirements, this may involve
assessing quality assurance procedures, financial resources, technical and
managerial performance, and past performance
(3) relevant costs that must be taken into account in addition to the purchase price
are: delivery, installation, training, maintenance and running costs, the costs of
changeover from one type of equipment to another, and the eventual resale or
disposal value; whole of life costs should be assessed wherever feasible, and
in appropriate cases the lease or rental of equipment should be compared with
outright purchase; the provision for price variations over time and the effect of
foreign exchange variation needs to be examined
(4) timeliness of delivery
(5) after-sales support
(6) effectiveness of warranties.
It is important that the assessments of value for money offered in tenders or other
proposals are documented so that any queries from suppliers or other interested
parties can be answered by reference to this documentation.
1.11 Dealing with Suppliers
Wirilda City Council must maintain a reputation for fair and impartial dealing with
suppliers and with those who bid for contracts to supply goods and services. This will
be achieved by:
(1) the demonstration of high ethical standards by all staff involved in purchasing,
including demonstrating an openness in the competitive acquisition process,
maintaining commercial confidentiality about competing proposals, and being
accountable and prepared to explain and justify choices made to unsuccessful
bidders and to others with an interest
(2) ensuring that there is fair and open competition and that, subject to the need
for economy and efficiency in the purchasing process, that all those who wish
to and might be capable of supplying goods and services are given the
opportunity to bid.
1.12 Methods of Purchase
Goods and services may be purchased by the issue of Purchase Orders, for cash, by
the use of a Wirilda City Council Credit Card or by use of other approved means within
limits specified.
1.13 Purchase Orders
Purchase Orders shall be used to initiate the procurement of ALL goods and services,
including where an approved credit card is used by a Cardholder to purchase goods
and/or services for the value of $100 or over for his/her division/branch.
Council Officers authorised to use credit cards to purchase goods and services for
other staff require a Purchase Order to initiate the transaction.
To comply with audit recommendations, each Purchaser Order must have two distinct
and separate signatures, one requesting the purchase, and the other authorising the
purchase. The Purchase Order must be authorised (that funds are available and that
the expenditure is approved) by an officer with authority to incur expenditure to the
extent of the proposed purchase.
1.14 Payment of Accounts
Cheques will be drawn on the last Thursday of every month. Officers should ensure
that appropriately authorised invoices are provided to Financial Services as soon as
practicable, and at least 72 hours prior to the cheque run. Payments requiring urgent
attention (for example, contracts) will be processed each Friday. In these
circumstances appropriately authorised invoices must be returned to Financial
Services at least 24 hours prior to the next cheque run. Off-line payments will not be
processed except in extreme circumstances authorised by the Chief Executive.
To comply with audit recommendations, all cheques will be posted to the creditor and
not returned to the Council Officer requesting the payment. Any exception must be
approved by the Executive Manager – Financial Services.
1.15 Used Equipment
Used or second hand equipment may be purchased and, while it may be impossible to
obtain competitive quotations for such goods, value for money considerations must be
satisfied.
1.16 Government Contracts
Subject to satisfying value for money criteria, purchases should be made using
existing contracts, such as MAPS / CPS where appropriate, although there is no
obligation to use such contracts.
1.17 Trade-in Policy
Unless otherwise agreed in a contract with an external party, trade in offers may be
accepted for equipment being replaced. The item being replaced shall be disposed of
to the best advantage of the Council, whether by trade-in, sale by tender, auction or
other means.
Details of trade-in offers, together with a report on the condition and serviceability of
the item, should be prepared by someone appropriately qualified and submitted to the
delegate for approval.
Purchase orders or contracts which include an allowance for trade-in may be approved
only by an officer authorised to incur expenditure to the value of the gross cost of the
new item, that is, the cost before deduction of the trade-in value. Quotation, tender and
purchasing procedures shall be related to the gross cost of the whole contract.
1.18 Overseas Purchasing
When goods are to be purchased direct from an overseas supplier, normal purchasing
procedures should be followed as far as practicable.
Overseas suppliers should be asked to quote for cost of goods including freight and
insurance (if applicable).
1.19 Goods and Services Tax (GST)
The New Tax System applies to Wirilda City Council in the same manner as it does to
any other Australian business. Council is registered as a tax entity for GST purposes.
The Australian Business Number (ABN) for Council is 45 09 251 0. The GST will be
included in the price of, and payable on, taxable supplies, and Council will be entitled
to claim input tax credits on creditable acquisitions. Council will only deal with
businesses or individuals that have a registered ABN, unless exceptional
circumstances exist.
Due to its size of turnover, Council is required to submit a tax return each month. This
tax return is in the form of a Business Activity Statement. Under this arrangement
Council will offset the GST collected from the sale of supplies such as merchandise
sales, entrance fees etc with input tax credits (for instance, GST paid on creditable
acquisitions). The net amount will either be remitted to, or collected from, the ATO.
The Council’s Business Activity Statement will be prepared and submitted by the
Financial Services division for the whole of Council.
2.0 CASH AND CREDIT CARD PURCHASING
2.1 General
All supporting invoices/vouchers and tax invoices must be obtained for
all acquisitions.
2.2 Petty Cash
The Petty Cash limit is $100. Cash purchases must be supported by receipts.
The Chief Executive, or relevant Director may approve reimbursement of
expenditure without the production of a receipt in certain circumstances.
Petty Cash is not to be used for the reimbursement of personal cheques.
All reimbursements for Petty Cash must be submitted to the Creditors Clerk for
verification and identification of GST, prior to reimbursement.
2.3 Credit Cards
Council credit cards may be issued only to approved persons on the authority of the
Chief Executive and must be used in accordance with Council policy. Council credit
cards are not to be issued to short-term contractors or consultants, nor to contract
personnel who have contracts that provide for them to be reimbursed costs incurred.
Council Credit Cards must not be used to incur personal expenditure, or expenditure
on behalf of other organisations, even if it will be reimbursed at a later date. When an
invoice contains both Council and non-Council expenditure, only the Council portion
can be charged to a Council Credit Card. The invoice should be clearly annotated and
the original documentation, where possible, retained by Accounts Payable.
Misuse of a Council Credit Card may lead to the Card being cancelled, and the
Cardholder may be required to pay restitution to Council and proceedings may be
instituted against the Cardholder.
Only delegates authorised to incur expenditure can approve expenditure on Credit
Cards. Funds must be available in the relevant budget and approval granted prior to
the incurring of expenditure. Purchase Orders must still be completed for purchases of
$100 and over, paid for via credit card.
Cardholders must certify their monthly credit card expense statement, confirming that
the costs were incurred for official purposes. Directors must endorse that the costs are
legitimate business expenses. Monthly credit card statements should be signed-off as
soon as practicable after receipt. Itemised receipts, including airline boarding passes
and/or tickets and vouchers/invoices, must be retained and filed with the relevant
statement/claim.
3.0 QUOTATIONS, TENDERS & EXPRESSIONS OF INTEREST
3.1 Definitions
For the purposes of these Financial Directions:
(1) a quotation is an offer to supply specified goods or to perform a service at a
stated price
(2) an offer of service is by definition a ‘quotation’ – refer above
(3) a tender is an offer made in writing in response to a public invitation to supply
goods or to perform a service as described in the relevant specification
(4) an expression of interest is a proposal made in writing in response to a public
or selective invitation to express or register interest in supplying services or
goods as described in a written outline of requirements or specification.
Expressions of interest, rather than tenders, are usually invited when the
requirement is not clear and it is desirable to seek proposals against a very
general specification in order to obtain and assess a range of possible
solutions before finalising the specification. Firm proposals will normally be
sought, after the specification has been firmed up, in a second phase, from
short listed bidders. Prices requested in the first phase may be indicative only
and are confirmed or firmed-up in the second phase.
Quotations
To establish that the Council is receiving value for money (refer paragraphs 1.2)
quotations shall be obtained in accordance with the following thresholds:
Estimated cost Required Action
Less than $5,000 at least one oral quotation
$5,000 - $9,999 at least one faxed, e-mailed, or written quotation (to be
attached to purchase order)
$10,000 - $49,999 at least three faxed, e-mailed or written quotations (to be
attached to the file)
$50,000 - $99,999 unless duly authorised by the Chief Executive, advertise the
Request for Quotation giving sufficient detail of goods/services
required.
$100,000 + Must go to tender (section 186 Local Government Act 1989).
Quotations should be received for all goods and services prior to ordering. This
process provides the authorising officer with an indication of the costs to which the
Council is being committed.
Quotations should be sought from potential suppliers where the cost of the works is
between $10,000 and $99,999. A register number must be obtained and a brief
specification is to be prepared by the appropriate officer in conjunction with Financial
Services. Finance will then be in a position to check for adequate Public Liability
insurance if applicable. Written quotations must be forwarded to Finance for
appropriate filing prior to formal acceptance of any offer by Council.
Council is to advertise a Request for Quotation for works between $50,000 and
$99,999, which gives details of the goods or services required and gives directions
about submitting the quotation to the appropriate Financial Services Officer by 2 p.m.
local time on the closing date. Quotations shall be signed (on the quotation page),
dated, and time of opening/receiving noted, prior to the details being recorded in the
register. Quotations will then be handed to the responsible officer for evaluation.
Quotations will not be required where a schedule of rates tender has been submitted
earlier, and the total works does not exceed the specified limit.
Where several identical items are required, the quotation and approval delegation
limits apply to the value of the total order, not to the cost of each item. Likewise it is the
total dollar value of a particular service that the quotation and approval delegation
limits apply to, and not the cost of individual services.
Breaches of these requirements may initiate disciplinary action, and will be reported in
the monthly financial report.
All purchases $100,000 and over must be subject to a formal tender process in
accordance with section 186 of the Local Government Act 1989.
3.2 Exemption from Quotation Action
If the required number of quotations cannot be obtained or if the officer determines that
there are justifiable reasons for not seeking the required number of quotations, then a
complete explanation shall be recorded and attached to the appropriate Purchase
Order so that any queries from suppliers or other interested parties may be answered.
Justifiable reasons approved by the relevant Director would include:
(1) where the need is extremely urgent and there is insufficient time to seek
quotations
(2) where there is a sole source of supply for the goods
(3) where the officer has recent valid evidence of the source of best value for
money, and is certain that obtaining quotations would not be cost effective.
3.3 Tenders and Expressions of Interest
Unless otherwise approved in accordance with paragraph 3.7, public tenders or
publicly advertised expressions of interest shall be invited and contracts let for goods
or services estimated to cost more than $100,000. Public tenders should be invited for
supplies and services costing less than $100,000 if it is thought that economies may
result from doing so or the range of possible suppliers is not known.
3.4 Public Invitation of Tenders or Expressions of Interest
A register number must be obtained and a brief specification prepared by the
appropriate officer in conjunction with Financial Services prior to any tender being
advertised. Tenders and expressions of interest for goods or services of a value
greater than $100,000 shall be invited by advertisement being placed in the relevant
newspaper giving interested persons the opportunity to tender or make proposals. The
closing date for the receipt of tenders shall not normally be less than two weeks from
the date of the advertisement with a closing time of 2pm local time, to allow interested
suppliers a reasonable time to submit an offer.
A copy of the specification of the goods or services required and the prescribed tender
form may be sent to likely tenderers when the advertisement is placed.
All specifications distributed should be recorded in a central register located in
Customer Services.
Tenderers shall be requested to either place all tenders in the locked tender box, or
submit tenders via e-mail to Council’s secured tender e-mail address. It is the
tenderer’s responsibility to ensure that tenders are received before the due date and
time, and Council accepts no liability for late delivery.
The financial services officer responsible for opening the tender box (and tender email
folder) shall inspect its contents at tender closing times, in the presence of another
Council employee.
All tenders received shall be signed (on the quotation page), dated, and time of
opening/receiving noted, prior to the details being recorded in the tender register.
Tenders will then be handed to the responsible officer for evaluation to commence.
Tenders shall be referred to a Tender Evaluation Committee.
3.5 Tender Evaluation Committees
Tenders shall be considered in terms of the key selection criteria specified, by a
committee of at least three people appointed for that occasion by the appropriate
officer. One member shall be an officer with relevant experience and knowledge of the
Council’s Financial Directions and Council purchasing policies and procedures. The
other members should have technical expertise in the field involved or, where tenders
of a less technical nature are involved (for example, cleaning contracts) be competent
to contribute to the assessment process. The Committee is responsible for making a
recommendation to the appropriate Director on the tenders received.
Once the tender has been authorised by the appropriate personnel, letters are to be
sent to both the successful and unsuccessful tenderers. A purchase order is to be
raised at this time and forwarded to the supplier, quoting the contract number.
Regular audits of tender evaluations will be undertaken to ensure compliance with the
guidelines.
3.6 Exemption from Tender Action
It is not necessary to invite tenders or expressions of interest for goods or services:
(1) which will be obtained under an existing government contract, subject to value
for money criteria having been satisfied
(2) which will be obtained from a Commonwealth or State Government department
or agency, subject to value for money criteria having been satisfied, or can be
obtained only from these sources or a local government body.
4.0 CONTRACTS
4.1 Definitions
For the purposes of these Financial Directions the term Contract shall include:
(1) Purchase Orders
(2) orders placed using a Council credit card
(3) Council’s standard form agreement documentation (notice of acceptance of
tender or proposal, Council’s General Conditions of Contract) and
accompanying Purchase Order, placed after the public invitation of tenders or
expressions of interest
(4) agreements normally used by a supplier or one drawn-up specially by the
supplier's legal advisers.
4.2 Authority to Approve Contracts
Subject to any restrictions or special arrangements in these Financial Directions,
contracts for the supply of goods and services may be approved within the limits of
authority to incur expenditure delegated below. In approving the issue of a contract the
officer is certifying that the expenditure is a proper charge to Council's funds, that
purchasing policy and procedures have been followed, that Council’s interests have
been protected in the contractual arrangements and that funds will be available within
the ledger number being charged.
It is a breach of authority to separate a single supply or service into parts with the
object of issuing two or more contracts which individually do not exceed an officers
authorisation, but taken together would do so. Where contracts are placed for services
for a lengthy period, for example, the hire or servicing of equipment, the operative
amount for the purpose of the authority is the total cost for the whole period of the
contract. Where there are additional expenses associated with a contract, for instance
with contracts for services or consultancies, these expenses must be estimated and
included to assess the total value of the contract for approval purposes.
When an officer becomes aware that a contract which he/she approved is going to
exceed his/her delegation level, because of cost increases, the officer shall brief the
Chief Executive.
Authorising limits (GST inclusive) :
$0 to $4,999 Responsible Officer
$5,000 to $49,999 Executive – Manager
$50,000 to $99,999 Director
$100,000 to $249,999 Chief Executive
$250,000 + Council
The authorising limits detailed above override and replace any previously authorised
limits, including those stipulated on employment contracts preceding the date of
adoption of this policy.
Breaches of this authority may initiate disciplinary action, and will be reported to MEG
as part of the monthly financial report.
4.3 Authority to Sign Purchase Orders and Contracts
Purchase Orders and notices of acceptance of tenders or proposals (sub-paragraph
4.1 (3)) for the purchase of goods and services may be signed only by an officer
appointed for that purpose (paragraph 4.2).
4.4 Procedures
A Purchase Order or other form of contract must be issued prior to the purchase and
delivery of goods or services.
A confirmatory order should be issued only in exceptional and unavoidable
circumstances, in which case it should be prepared and issued immediately verbal
arrangements have been completed. Precautions must be taken to avoid duplicate
delivery or duplicate payment. Reasons for issuing a confirmatory order should be
recorded on the relevant file.
Any variation of the terms of a contract must be arranged through the division/branch
which issued the contract, documented in writing and placed in the contract file.
A copy of all Purchase Orders, contracts, and contract variations, signed by the
appropriate officer (paragraph 4.2), shall be filed with the Financial Services Branch.
An officer, unless duly authorised, shall not incur any liability or enter into any contract
on behalf of the Council or alter the terms or conditions of any approved contract.
All relevant correspondence with the Contractor, checklists and audits, shall be kept
on the contract file.
All contracts shall be centrally filed with the Financial Services Branch.
4.5 Control of Approved Forms
The security of unused pre-printed Purchase Order forms must be ensured by the
implementation of control measures. Forms are printed with a sequence number and
all numbers in the sequence should be accounted for. This action is necessary to
prevent misuse of Purchase Order forms. All copies of spoiled Purchase Order forms
must be retained.
5.0 SPECIAL INSTRUCTIONS
5.1 Contracts for Services - Consultancies
Prior to arranging a contract for services it is necessary to make a cost benefit
assessment which shows that a contract for service is the most beneficial option in
terms of being cost-efficient and in contributing sensibly to Council’s overall goals.
Normal purchasing procedures, including value for money considerations (see
Paragraph 1.2), apply to the engagement of all contractors and consultants, where a
consultant is defined as an independent contractor, either a company or individual,
who provides a consultancy service which entails the application of expert skills to
such tasks as providing specific management advice, training staff, and providing
professional services.
Consultancies relating to politically sensitive issues or projects will require the Chief
Executive's endorsement, and may require Council approval.
It is essential that all contracts for services be properly negotiated and documented so
as to ensure that both parties fully understand the relationship, and so that outcomes
can be monitored.
All financial commitments to services contractors must be recorded by production of a
Purchase Order.
5.2 Training
Training is to be undertaken for all relevant staff, and will form part of Council’s
adopted induction program.
