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Item 4CM E M O R A N D U M September 15, 2020 To: From: Subject: Shana Yelverton, City Manager Sharen Jackson, Chief Financial Officer Item 4C Approve Resolution No. 20-036, approving new Purchasing Policy Action Requested: Approval of Resolution No. 20-036, amending the purchasing policy. Background Information: The current purchasing policy was adopted on October 2, 2007. The proposed policy shall allow City Staff to adapt to changes in both State law and purchasing technology by mirroring the purchasing policy to State purchasing statutes. The current policy includes both the purchasing policies and how the policy is implemented. The proposed policy shall set the purchasing policies and allow City Management to implement administrative policies and procedures, which shall outline how City Staff shall implement the purchasing policy. This will allow the administrative policies and procedures to be updated as technology and State statutes change. The proposed purchasing policy sets bidding parameters by reference to the current State statute levels. Existing bidding parameters: $2,500 or less no quotes required, but recommended $2,501 - $9,999 require written quotes $10,000 - $49,999 require written sealed bids/proposals $50,000 or more require sealed bids/proposals following State competitive purchasing requirements Recommended bidding parameters: $3,000 or less no quotes required, but recommended $3,001 - $24,999* require written quotes/bids/proposals $25,000 - $50,000* require written bids/proposals More than $50,000 require sealed bids/proposals following State competitive purchasing requirements *Set by administrative policy and procedures. State statute only requires HUB vendors be contacted at these bidding parameters. Disposal of Surplus Property Under the current purchasing policy, all items are to be auctioned. Under the proposed policy, items with an estimated net auction value of less than $500 may be donated to a non-profit organization, recycler, or disposed of. The cost of storage of these items and personnel time required to manage the auction items is significantly more than the net proceeds and therefore, not cost effective. Financial Considerations: None. Strategic Link: B2 – Collaborate with select partners to implement service solutions B5 – Enhance service delivery through continual process improvement F4 – Establish & maintain effective internal controls Citizen Input/ Board Review: None Legal Review: None Alternatives: Approve, amend, or deny resolution. Supporting Documents: Resolution 20-036 Purchasing policy Staff Recommendation: Approve resolution 20-036. RESOLUTION NO. 20-036 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, APPROVING A NEW PURCHASING POLICY. WHEREAS, the City Council of Southlake on October 2, 2007 adopted a Purchasing Policy; and WHEREAS, the City Manager has recommended substantial revisions to same; and WHEREAS, the City Council desires to approve the revisions; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, THAT: SECTION 1. The City of Southlake hereby adopts the Purchasing Policy, attached hereto as Exhibit “A” and incorporated by reference herein. SECTION 2. The former Purchasing Policy is repealed. SECTION 3. This Resolution shall take effect upon its adoption and it is so Resolved. PASSED AND APPROVED ON THIS, THE __________ DAY OF ______________ 2020. CITY OF SOUTHLAKE, TEXAS ____________________________ Laura Hill Mayor ATTEST: __________________________ Amy Shelley, TRMC City Secretary City of Southlake Policies and Procedures Policy: Purchasing Policy Source: City Council Category: Finance Administration Effective Date: September 15, 2020 City Council Approval Date: September 15, 2020 Purpose The purpose of this Purchasing Policy is to ensure accountable, efficient, transparent, and ethical practices are used to acquire products and services. This policy is intended to promote the best interest of the citizens of the City and compliance with State purchasing statutes. Applicability The Purchasing Policy applies to the purchasing activities of the City. Responsibility and Authority Under the City of Southlake’s Charter 9.41, the Council may, by ordinance, confer upon the City Manager general authority to contract for expenditures without further approval of the Council for all budgeted items not exceeding limits set by the Council. All contracts for expenditures involving more than the set limits must be expressly approved in advance by the Council. All contracts or purchases involving more than the limits set, shall be let to the bidder whose submittal is among those most responsive to the needs of the City after there has been opportunity for competitive bidding as provided by law or ordinance; provided that the Council, or City Manager in such cases as he/she is authorized to contract for the City, shall have the right to reject any and all bids. With Ordinance No. 888, dated June 19, 2005, City Council conferred upon the City Manager general authority to contract for expenditures without further approval of the Council for all budgeted items not exceeding limits as specified in Texas Local Government Code 252.021(a) or its successor statute. City Council must approve all other purchases, except when an emergency purchase exists, as defined by state law. Department Directors shall ensure their department’s adherence to this policy. Department Directors shall determine and assign the appropriate approvers within their department. Approvers are responsible for ensuring that departmental purchases adhere to this policy and all budgetary requirements. Definitions Competitive Sealed Bids A purchasing method by which a governmental entity will indicate specific requirements and specifications for its purchasing need and then posts a notice inviting potential suppliers to submit bids with their offered price. Each bidder gets the chance to submit a bid once without any modifications allowed. The government will typically select the bidder who offers the lowest price or best value to the entity. Competitive Sealed Proposals A purchasing method by which a governmental entity may request proposals and pricing information based on the scope of work provided, rank the offerors, negotiate a contract, and then award the project to the contractor that offers the best value and most advantageous proposal. Component Purchases Purchases of the component parts of an item that in normal purchasing practices would be purchased in one purchase. Historically Underutilized Business (HUB) A corporation, sole proprietorship, partnership or a joint venture formed for the purpose of making a profit in which at least 51 percent ownership of the business is by a woman, minority and/or service-disabled veteran. The State of Texas must certify the business as a HUB to qualify. Separate Purchases Purchases, made separately, of items that in normal purchasing practices would be purchased in one purchase. Sequential Purchases Purchases made over a period, of items that in normal purchasing practices would be purchased in one purchase. General Purchasing is a function of each department. The Purchasing Division shall provide guidance and assistance to departmental personnel regarding purchasing. The Purchasing Division shall monitor compliance with purchasing laws, City policies and procedures. All purchases shall be in accordance with the laws of the State of Texas, including, but not limited to, Chapters 252 and 271 of the Texas Local Government Code, and the City of Southlake Charter. All purchasing shall adhere to sound purchasing procedures to ensure that Southlake taxpayers receive the best value for City purchases. Bidding Parameters Purchases Less Than the HUB Requirements The Texas Local Government Code 252.0215 or its successor statute sets the Historically Underutilized Business (HUB) requirements. No quotes are required but are recommended when possible. Only departmental level approval as determined by the Department Director is required. Purchases within the HUB Requirement Range These purchases require at least three (3) informal written quotes/bids. At least two (2) of the contacts solicited for quotations must be from vendors on the State’s current certified HUB list. If the listing fails to identify a HUB in the county in which the City is situated, the City is exempt from this requirement. The written quotes and the solicitations must be retained for auditing purposes. The Texas Local Government Code 252.0215 or its successor statute sets the Historically Underutilized Business (HUB) requirements. Departmental level, purchasing division, and when applicable, City Manager Office approvals are required. Purchases Governed by the Competitive Purchasing Requirements The Texas Local Government Code 252 or its successor statute sets Competitive Purchasing requirements. The City may use either Competitive Sealed Bids or Competitive Sealed Proposals for expenditures or purchases subject to Competitive Purchasing requirements. Contracts required to be procured by Competitive Purchasing are awarded or rejected by the City Council. Competitive Sealed Bidding The City will use the “best value” method to award contracts under the competitive sealed bid method. The City will indicate in the bid specifications that the contract may be awarded either to the lowest responsible bidder or to the bidder who provides goods and services at the best value to the City. The City will further indicate in the bid specifications that it reserves the right to reject any or all bids and reopen the bidding process if it is in the best interest of the City. In determining the “best value” for the City, the City may consider: • Purchase Price; • Reputation of the bidder and the bidder’s goods and services; • Quality of the bidder’s goods or services; • Extent to which the goods or services meet the City’s needs; • Bidder’s past relationship with the City; • Impact on the ability of the City to comply with laws and rules relating to contracting with historically underutilized businesses and nonprofit organizations employing persons with disabilities; • Total long-term cost to the City to acquire the bidder’s goods or services; and • Any relevant criteria specifically listed in the request for bids. Competitive Sealed Proposals Requests for proposals must solicit quotations and must specify the relative importance of price and other evaluation factors. Discussions in accordance with the terms of a request for proposals may be conducted with offerors who submit proposals and who are determined to be reasonably qualified for the award of the contract. Offerors shall be treated fairly and equally with respect to any opportunity for discussion and revision of proposals. To obtain the best final offers, revisions may be permitted after submissions and before the award of the contract. Exceptions to Competitive Purchasing Requirements Texas Local Government Code Section 252.022 or its successor statute outlines exemptions from the Competitive Purchasing Requirements, including during emergencies. With Ordinance No. 888, City Council conferred upon the City Manager authority to authorize emergency expenditures, as defined in State statute, without competitive bids / proposals. The City Manager shall present the emergency expenditures to City Council for ratification within 30 days. Change Orders With Ordinance No. 888, City Council conferred upon the City Manager the authority to approve change orders to a contract for a decrease or increase up to the amount specified in Texas Local Government Code Section 252.048(c). City Council shall approve a decrease or increase greater than the amount specified in Texas Local Government Code Section 252.048(c). The original contract price may not be increased by more than 25 percent. The original contract price may not be decreased by more than 25 percent without the consent of the contractor. Criminal Penalties A City officer or employee commits an offense if the officer or employee intentionally or knowingly makes or authorizes separate, sequential, or component purchases to avoid the competitive bidding requirements of Texas Local Government Code Section 252.021 (Competitive Requirements for Purchases) or any other requirement of Chapter 252 of the Code. Disposal of Surplus Property The City shall dispose of a surplus property item with an estimated net auction value greater than $500 through a public auction or internet sale to the highest bidder. For heavily damaged or items with an estimated net auction value less than $500, the City may donate the item to a nonprofit organization, recycler, or dispose of the item. The cost of storage of these items and personnel time required to manage the auction items, including meeting the highest bidder is significantly more than the net proceeds and therefore, not cost effective.