POAdjustments, Liquidations, & Contract Amendments/Change Order for ALL DEPARTMENTS (Side 1) Purchasing Staff:

Roberto Cardenas, Fiscal Services Mgr., ext. 3944

Mary Vollmuth, Purchasing Coordinator, ext. 3932

June 11, 2009- Finance Department (Purchasing)

The City of Temecula revenues and expenditures are accounted for in a series of funds. The Operating Budget is adopted by the City Council for the current fiscal year, which runs from July 1st through June 30th. When a purchase requisition/purchase order is generated (entered and printed in EDEN) in the City’s financial system the funds are “encumbered” (held) within the designated account for the amount indicated on the purchase requisition. To effectively manage the budget, departments should not keep funds encumbered unnecessarily. A purchase orderadjustmentshould be initiated when a revision is needed to an existing purchase order that is still required(Note:if there is a contractual agreement tied to the original purchase order (PO) please refer to theContract Amendments & Change Order policyoutlined on side 2 of this Cliff Note for standard procedureprior to initiating a PO Adjustment). A purchase order liquidationshould be initiated if the purchase order has been paid against in full or is no longer required. The budget for the current fiscal year cannot include prior year encumbrance’s/expenditures, with the exception of Capital Improvement Projects (CIP) and other exception situations as approved by the Director of Finance and/or Purchasing Manager. To maintain the integrity of the budget process and the purchasing system, the Purchasing Division begins the process of “closing” purchase orders in preparation of end of year starting in the month of May or June as determined by the Director of Finance (Note: refer to “End of Year PO Closeout” Cliff Notes for PO closing and rollover procedures).

Policy:

Changes of any kind that affect the purchase order or contractual Agreements (refer to Contract Amendments & Change Order procedures below) will only be made through written request to the Procurement Division using the appropriate method and authorization level.

Purchase Order (PO) Adjustments:Purchase Order adjustments are generally processed against existing purchase orders for non-contractualgeneral supplies, goods, materials, equipment, and services whereas the total cost (original po amount plus amendment amount) does not exceed $30,000. Purchase Order adjustments pertaining to purchase orders that are for Minor Construction/Maintenance and Public Works Construction are contractual changes requiring “change order” procedures as outlined in the Contract Amendments & Change Order procedures outlined on page 2. Purchase Order adjustments for Professional Services and Cultural Arts Performances are contractual changes requiring “contract amendment” procedures as outlined in the Contract Amendments & Change Order procedures outlined on page 2. Any PO adjustment exceeding $1000 requires the same signature authorization requirement as outlined in the “Purchasing” procedures. All PO adjustments and contract amendments that exceed (original amount plus adjusted amount) $30,000 must be approved by the City Council priorto submitting to Purchasing for processing. Prior to initiating a purchase order adjustment the requesting department determines if the original purchase order is tied to a contract (if unsure please contact the Purchasing Division).If there is not a contractual agreement tied to the original purchase order, refer to the procedures listed below:

A non-contractual purchase order adjustment should be initiated by the generating department when:

  • An item needs to be added to or deleted from an existing purchase order.
  • The price of an item or the quantity of an item needs to be decreased or increased.

Note: A revision to increase the amount of the POis generally only processed if no invoices have been posted to the purchase order. If invoices have been posted to the purchase order, a new purchase requisition may be required for the amount of the increase. If this is the case, Purchasing will notify the requesting department and indicate the correct requirement.

  • The overall total dollar limit needs to be lowered or raised.

The requesting department may request a purchase order revision by Purchase Order Adjustment Request form:

  • Complete Purchase Order Adjustment Request form (located under the Finance Dept / Procurement on Sharepoint).
  • Obtain approval signature from the Department Director if the adjustment is for an increase.
  • Forward request to the Procurement Division.
  • Upon receipt of request, Purchasing will obtain any additional signature authorizations and make the appropriate purchase order adjustment.

Note: a new purchase order is not generated for purchase order adjustments. The adjustment is processed in the EDEN system and Purchasing indicates the changes manually on the originalPO copy filed in the Purchasing department and the Accounts Payable copy. The requesting department is responsible for making the changes on their department file copy of the purchase order. Purchasing will provide an altered copy of a purchase order, upon request, only if it is required by the Vendor and if there has only been a single, minor change to the PO, as a re-print will indicate all line item changes and reflect the verbiage “This Is A Revised Purchase Order”. If a department requires confirmation of a PO adjustment please indicate this requirement on the PO Adjustment form.

Purchase Order (PO) Liquidations:Each department receives a “Purchase Order List By Account Number” (PO List) report each week. This report lists all the purchase orders requisitioned by the department. The generating department is responsible for reviewing the PO List to determine if the purchase orders listed should remain open or be liquidated. The Procurement Division shall also be responsible for reviewing the PO List on a quarterly basis to research purchase orders outstanding more than 3 months and remaining balances at $50.00 and under and it is suggested generating department’s do the same. Purchase Order liquidations do not require the same signature approval as needed for the generation of a PO adjustment and must be completed by the Procurement Division.

PO Adjustments, Liquidations, & Contract Amendments/Change Order “Cliff Notes” continued (Side 2)

A PO liquidation (cancellation) should be initiated by the generating department when the purchase order is simply no longer needed including, but not limited to, the following reasons:

  • Goods or services were received and billing invoices were less than the PO amount.
  • Purchase no longer required.
  • Project is completed and purchase order balance(s) no longer required.
  • “Open PO” not utilized or no longer required.
  • Duplicated expenditure (PO processed, but payment made via check request or credit card).

The requesting department may request a purchase order liquidation via Purchase Order Adjustment Request form or e-mail request :

  • Indicate the purchase order number, Vendor name, and instructions to liquidate.
  • Forward request to the Purchasing Division.
  • Upon receipt of request, Purchasing will liquidate the purchase order.

If a department requires confirmation that a PO liquidation was completed, please indicate this requirement on the for or in the e-mail to Purchasing.

Contract Amendments: When considering a revision/change to a purchase order the requesting department must also determine if a contract/agreement is tied to the purchase order, and if the revision/change will require a contract amendment. Contract amendments are processed for professional and general service agreements (note: see Contract Change Order procedures for construction and any type of maintenance agreements). If the contract amendment is to increase the payment amount of the contract the initiating department first needs to determine if the adjustment amount plus the original amount will exceed $30,000.00. If it exceeds $30K the contract amendment will require City Council approval. If it does not exceed $30K the City Manager may approve the contract amendment. It is the responsibility of the requesting department to initiate any contract amendments prior to requesting a revision/change to a purchase order. A sample copy of a contract amendment can be located on Procurements Sharepoint site.If you are unsure of how to proceed with a contract amendment, please contact Procurement.Once the fully executed copy of the contract amendment is received the initiating department attaches to the purchase requisition if needed or forwards to the Procurement Division for filing with the original purchase order. The types of Agreements that generally would fall into the category of contract amendment are:

  • Artist/Entertainer/Entertainment
  • Concession
  • Consulting/Professional Services (ie:design, financial services, printing, research, etc.)
  • Equipment & Any Other Commodity Purchase
  • Performance/Performing Arts
  • Photography
  • Software Purchase & Maintenance
  • Training

A contract amendment is required for, but not limited to, the following reasons:

  • Ownership or name change of the company originally contracted with.
  • Term of the contract has expired and needs to be extended.
  • The payment amount of the contract has decreased or increased.
  • The scope of work (services) of the contract has changed in any manner.

Contract Change Orders:A change order is made to a contract and purchase order when the specifications of a project have changed from the original agreement, resulting in a decrease and/or increase in the contract payment amount regardless of whether invoices were previously paid or not. Change Orders are facilitated by the requesting department and require either a memo to the City Manager if the change is within the City Manager’s approval authority or City Council if the change exceeds the City Manager’s approval authority. The memo/staff report should provide a brief history of the project, the reason for the change, a recap of expenditures, and verification of available funds for any increase required. The Change Order itself should outline the project name and number, Contractor’s name, a detailed outline of all new changes, a recap of any previous changes, the total decrease/increase cost of the project, the original contract amount, the adjusted contract amount, and the revised estimated number of workdays for the project. The contract change order must reflect all the appropriate authorized signatures and is either attached to a purchase requisition if needed, or forwarded to the Procurement Division for filing with the original purchase order. Note: due to the complexity of contract change orders the Fiscal Services Manager and/or Public Works Capital Improvement Program Manual should be consulted before proceeding with any change order.

The types of Agreements that generally would fall into the category of contract amendment are:

  • Public Works Construction Contracts (new buildings, roads, bridges, traffic lights, etc.)
  • Maintenance Contracts (parks, roadways, right of ways, existing buildings etc.)
  • Minor Construction & Maintenance Contracts (projects under $125,000)
  • One-Time Work Agreements (as applicable)
  • Equipment Installation (as applicable)

A contract Change Order is required for, but not limited to, the following reasons for Public Works Construction & Maintenance:

  • To alter the specifications of a contract/purchase order in any manner from its original state..
  • The change in specifications or expenditures result in a decrease or increase in the amount of the original contract.
  • The contingency dollar amount of the contract has been expended and the project is still ongoing.