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Fiscal Procedures Manual


Chapter 4 - Purchasing Procedures and Documents

4-1 Authority and Responsibility
4-2 The Purchasing Process
4-3 Accounting and Budgetary Effects
4-4 Classification of Purchases
  1. Non-commodity purchases
  2. Commodity Purchases ($1000 or more)
  3. Services
4-5 Purchase Requirements
  1. Agency Authority
  2. Purchases between $1000 and $14,999.99
  3. Purchases greater than $14,999.99
  4. Advertisement/Solicitation of bids
  5. Award of contracts
  6. Assignment of contracts
  7. Letting of contracts without public advertisement
  8. Priority Authorization
  9. Sole Source
  10. Open End PO/DO requirements
  11. Purchase Negotiations
  12. Products by the Alabama Institute for the Deaf and Blind (AIDB)
  13. Cancelling a contract


4-1 Authority and Responsibility
The Division of Purchasing, Department of Finance is established by statute (Code of Alabama 1975, §41-4-110-115, as amended) and is under the direction of the State Purchasing Agency (State Purchasing Director).  The Division purchased all personal property and nonprofessional services, except alcoholic beverages, for all State departments, boards, bureaus, commissions, agencies, offices and institutions.  The Division is also responsible for making and supervising the execution of all contracts and leases for the use and acquisition of any personal property and nonprofessional services.  Education and eleemosynary institution, State Port Authority, Department of Mental Health and the purchase order alcoholic beverages are exempt from the authority of the Division of Purchasing (Code of Alabama 1975 §41-16-21(b)) as amended.

Sections referenced by a paragraph number are in accordance with the Code of Alabama 1975, as amended.

4-2 The Purchasing Process
The purchasing process begins with the submission of a requisition to the Division of Purchasing through the STAARS system.  STAARS is an integrated system that contains both the financial and procurement activities for the State of Alabama at both the state level and the department level chart of accounts.  Requisitions will be converted to purchase orders and issued to vendors with the accounting component verifying the availability of budgetary authority through encumbrance accounting.  Agencies without STAARS access will send in the Purchase Request Form to be entered into STAARS on behalf of the agency.  The instructions for completing a Purchase Request form can be located at www.purchasing.alabama..gov under Purchasing News.

4-3 Accounting and Budgetary Effects
When a requisition is entered into the STAARS system, a pre-encumbrance may be created.  Accounting the pre-encumbrances are at the discretion of each department.  The effect of a pre-encumbrance is to commit a portion of the department’s appropriation at the time the requisition is processed.  The pre-encumbrance does not affect the department’s cash or allotment balance.

Once the requisition is approved, it continues through the purchasing process (bid procedures, if applicable).  When the process is completed, a purchase order or master agreement is created and a copy is e-mailed to the vendor.  The process of creating a purchase order reverses out the pre-encumbrance related to the requisition, and created an encumbrance of the department’s funds.  The department’s appropriation and allotment balances must be adequate to cover the amount of the purchase order.  The purchase order will obligate the department’s appropriation and allotment by this amount.

4-4 Classification of Purchases

There are three classifications of purchases.  Non-commodity Purchases, Commodity Purchases (Personal Property), and Services.

A.     NON-COMMODITY PURCHASES

The following non-commodity purchases do not require requisitions or purchase orders:
                Postage
                Insurance
                Membership Dues
                Building Contracts
                Real Estate Rental
                Salaries and Wages
                Post Office Box Rentals
                Bonds of Officials or Employees
                Professional Services (subject to §41-16-72) (See Chapter 5)
                Department of Transportation Construction Contracts
                Utility Services (gas, water, electricity, telephone)
                Expense Accounts (transportation, meals, lodging)
                Interdepartmental Purchase of Materials or Services
                Subscriptions, one-time payment less than $1,000 (periodicals, magazines, books)

B.     COMMODITY PURCHASES ($1,000 OR MORE)

The following commodity purchases must be procured through the Division of Purchasing: 
                Supplies
                Materials
                Equipment, Furniture and Fixtures
                Subscriptions $1,000 or more (periodicals, magazines, books)

C.     SERVICES

Purchases of nonprofessional services, other than those excluded by statute, must be procured through the Division of Purchasing.  These purchases include buy are not limited to:
                Repairs $1,000 or more
                Maintenance
                Equipment Rental
                Janitorial Service, Pest Control, Garbage Service, etc

 

4-5 Purchase Requirements

A.     AGENCY AUTHORITY

Up to $999.99 Materials, supplies, services, and equipment, except weapons or when the freight and equipment total $1,000 or more.

When the agency reaches its authority of like or similar items (up to $999.99), agency must procure with a PO.  If the agency inadvertently exceeds its authority by the purchase of like or similar items during a fiscal year, a letter must be written to the State Purchasing Director for approval explaining the nature and or circumstances of the purchase(s).

B.     PURCHASES BETWEEN $1,000 AND $14,999.99

State Purchasing required a minimum of two written valid vendor quotes.  Purchasing may require additional quotes depending on the circumstances.  Under no circumstances shall the agency exceed $14,999.99 for like or similar items during the fiscal year unless it has been competitively bid.

Valid Quote must include at a minimum:
               
1. Company name, company address, individuals name providing quote, contact information, date of quote, item being quoted, and price of item being quoted.
                2. Quotes must be firm pricing.

When freight charges cause the authorized amount to be exceeded, the Comptroller will allow this charge up to 1% except in situations where freight would cause the amount to exceed $14,999.99.  When freight charges exceed 1%, it must have Purchasing approval.  When an agency fails to get a priority authorization, or exceed their authority, a letter must be written to the State Purchasing Director for approval explaining the nature and/or circumstances of the purchase.

C.     PURCHASES GREATER THAN $14,999.99

All contracts for labor, non-professional services, purchase or lease of materials, equipment, supplies, or other personal property for $15,000.00 or mote by any state department, board, bureau, commission, committee, institution, corporation, authority, or office must be let by free and open competitive bidding, on sealed bids, to the lowest responsible bidder (§41-16-20).

Competitive bids are not required for the following (§41-16-21):
                1.  Utility services – no competition exists, or rates are fixed by law or ordinance  
                2.  Insurance by the State (subject to §41-16-72)
                3.  Contracts to secure the services of attorneys, physicians, architects, teachers, appraisers, engineers, consultants, or other individuals processing a high degree of professional skill (subject to §41-16-72) (See  Chapter 5)
                4.  Contracts of employment in the regular civil service of the state
                5.  Purchase of alcoholic beverages by the ABC Board
                6.  Purchases and contracts for the repair of equipment used in the construction and maintenance of  highways by the Department of Transportation
                7.  Products made by Alabama Institute for the Deaf and Blind or products purchased from Alabama  
 Correctional Industries (§21-2-1 to 4)
                8.  Maps, photographs, or other items from a federal agency
                9.  Contract services/personal property when there is only one vendor (§41-16-75)
                10. Contractual services and purchases of personal property, which by their nature are impossible to award by competitive bidding
                11. Barter transactions by the Department of Corrections
                12. Purchases, contracts, or repairs by the Alabama Port Authority when it is deemed by the Director and  the Secretary-Treasurer of the Alabama Port Authority that the purchases, contracts, or repairs are                impractical to award by competitive bidding.  The Director and the Secretary-Treasurer of the Alabama Port
Authority will provide a signed sworn statement as to the emergency or necessity for negotiation, instead of    
proceeding by the competitive bidding requirements (§41-16-21).

D.     ADVERTISEMENT/SOLICITATION OF BIDS

The State Purchasing Director is required to advertise for sealed bids, on all purchases in excess of $14,999.99.  Under the direction of the State Purchasing Director, notice of sealed bids will be provided to all Alabama persons, firms, or corporations… and other persons, firms, or corporations the State Purchasing Director deems necessary to insure competition.  No purchase or contract involving an amount of $15,000 or greater may be divided into partial contracts to avoid the requirements of this article (§41-16-24).

E.     AWARD OF CONTRACTS

Purchases made through competitive bidding will be awarded to the lowest responsible, bidder, with consideration given to the quality of the commodities, conformity to specifications, terms of delivery, and freight charges.  A contract for the purchase or personal property or nonprofessional service will be let for periods no greater than five years.  Multiple-awards may be issued, if notice is contained within the competitive bid, when technical compatibility and/or operational specifications are required (§41-16-27). All state agencies are required to use established statewide contracts (Master Agreements).

F.     ASSIGNMENT OF CONTRACTS

An awarded contract is not assignable by the bidder without written consent of the awarding authority and the requisitioning agency.  A contract cannot be assigned to a bidder whose bid was rejected (§41-16-29).

G.     LETTING OF CONTRACTS WITHOUT PUBLIC ADVERTISEMENT

In case of emergency affecting the public health, safety, economic welfare, security, or convenience; as declared in writing by the department or agency head, a contract may be let to the extent necessary to meet the emergency without public advertisement.  The Comptroller’s Office will honor payment for a period of one year from date of declaration posting; should the emergency continue to exist after a one year time period, it will be necessary to re-declare and the reasons for it will be made public by the awarding authority (§41-16-23 & 41-16-72(6)).  The public declaration must include the following:
                1.  Code of Alabama Section(s) executed
                2.  Date and location emergency occurred
                3.  Description of damage and affect to the health, safety, economic welfare, or inconvenience of the general public of Alabama
                4.  Estimated date of post-emergency correction
                5.  Name of contractor(s) associated with recovery

H.      PRIORITY AUTHORIZATION

The priority authorization (PA) is initiated through STAARS.  The priority authorization is used for emergency/critical situations only.  A justification must be included and a quote attached.  A priority authorization cannon exceed $14,999.99 unless sole source justification is attached.

When freight charges cause the authorized amount to be exceeded, the Comptroller will allow this charge up to 1% except in situations where freight would cause the amount to exceed $14,999.99.  When freight charges exceed 1%, it must have Purchasing approval.  When an agency fails to get a priority authorization, or exceeds their authority, a letter must be written to the State Purchasing Director for approval explaining the nature and/or circumstances of the purchase.

I.     SOLE SOURCE

For a product or service to be purchased via a sole source declaration (§41-16-75), the agency must establish that no other products or services can meet its needs and that no other vendor offers substantially equivalent products or services that accomplish the purpose for which they are required.  The agency must submit a signed letter to the State Purchasing Director, on agency letterhead, attesting to the above along with a letter from the vendor declaring their sole source status and a quote for the products or services.

J.     OPEN END PO/DO REQUIREMENTS

Open End PO’s/DO’s will only be processed by the Division of Purchasing under the following circumstances:
                1.  For services (i.e. pest control, garbage, cell phones, temporary IT personnel services, etc.)  Agencies will establish the PO/DO with an amount of money and modify the amount as needed to cover invoices.
                2.  For items used in the maintenance or repair of facilities/physical infrastructure where the need cannot be  planned or predicted, open end DO’s will be allowed in the following manner.
                3.  To establish an open end from a Master Agreement, the DO must reference ‘Open End’ in the Header Document name.
                4.  To establish an open end with a non-contract vendor to purchase non-contract items, a RQM will be submitted referencing ‘Open End-M&R’ (Maintenance & Repair) in the Header Document Name, then a
MAOP1 will be created.
                5.  To establish an open end with a non-contract vendor, in cases where a facility is not located near a
contract vendor, the agency may set up one MAOP1 to purchase these items.  Prior to submitting a RQM,
 the agency must submit a justification letter to the Purchasing Director for approval.  The approved letter
must be submitted with the RQM with references ‘Open End-M&R’ in the Header Document name.

For other situations, the purchase of goods with an open end PO/DO will be considered on a case by case basis with a letter of justification submitted to the State Purchasing Director.

K.     PURCHASE NEGOTIATIONS

All negotiations pertaining to the purchase of commodities, leases, or lease/purchase agreements are to be handled only by or with the knowledge and consent of the State Purchasing Director.  The departments are authorized to obtain price quotations from local vendors and submit these quotes with the requisition.  The Division of Purchasing will obtain and furnish information regarding sources of supplies, quotations, or other data, which may be requested.

L.     PRODUCTS BY THE ALABAMA INSTITUTE FOR THE DEAF AND BLIND (AIDB)

Whenever products made by the AIDB meet the requirements of the department or agency in terms of quality and quantity, then these products will have preference.  These products do not take priority over products produced of manufactured by Alabama Corrections Industries (Code of Alabama 1975, §21-2-2, as amended).

M.  CANCELLING A CONTRACT

A term contract can only be cancelled by the Division of Purchasing, for documented justifiable cause.  The burden of such cause rests with the agency for whom the contract was established.  A vendor may request cancellation and the Division of Purchasing may grant the request if performance is prevented by an act of God, act of War, order of legal authority, or other unavoidable circumstances not attributable to the fault or negligence of the vendor.  The burden of proof for such relief rests with the vendor.  All correspondence pertaining to cancellation of a term contract must be addressed to the State Purchasing Director.  Contracts for services may be cancelled, for justifiable cause, by the Division of Purchasing, by giving the vendor 72 hours’ written notice.

 
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