Purchasing Basics for New Directors in New Jersey State Library
Explore the essentials of the purchasing process for new directors in libraries, covering topics from determining costs to understanding thresholds and qualified staff requirements. Gain insights into navigating the complexities of procurement and staying compliant with changing laws and regulations.
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PURCHASING BASICS FOR NEW DIRECTORS New Jersey State Library February 28, 2018 Karen Brodsky, MLS, QPA Director, Library of The Chathams Based on Original Presentation by Victoria Rosch
Disclaimer Do not rely on this presentation in determining what is legally required for your library. Purchasing is an inexact science and I do not know all the variables for your library. This is a general overview of the Purchasing Process and how I implemented it at Library of The Chathams with the approval of that library auditor and attorney. I live by this creed: What is approved today may be a violation tomorrow. I offer you a framework to start developing your own processes for your own library. - Karen Brodsky
Always Be Aware 1. Purchasing is time-consuming and complicated even when you know what you re doing. 2. Purchasing can be very interpretative. 3. Need to check all sources every time you take action because laws and regulations change.
Starting Point For Each Purchase Determine the Rough Cost Determine one-time cost (if a one-time purchase) or Aggregate cost (if purchase more than once in a 12-month period). With this estimated number: 1. Determine if your purchase meets the threshold for: Bidding Process (or Competitive Contracting), Quote Process, or Use of Sound Business Judgment 2. Prevailing Wage Threshold - $15,444 3. Pay to Play Required - $17,500 4. NJ Business Registration Certificate required --15% of bid threshold.
Thresholds and Qualified Staff Thresholds change every 5 years (in years ending in 0 and 5) Designation as a Qualified Purchasing Agent (QPA) requires a certificate issued by the Division of Local Government Services as well as ongoing training Many libraries do not have a QPA and must meet the threshold standards for those local government units without a QPA
The Thresholds * Without QPA/With QPA: Less than $2,625/$6,000 Use sound business judgment or follow your purchasing manual $2,625-$17,500/$6,000-$40,000 (or to whatever limit is authorized by resolution of governing body up to $40,000) Get at least 2 quotes for services from 15% of bid threshold up to the bid threshold More than $17,500/$40,000 (or to whatever limit is authorized by resolution of governing body up to $40,000) Requires the bidding process or an alternative, often-complicated procedure *current as of 2-18-2018
Lowest Responsible and Responsive Bidder New Jersey LPCL and Regular Reference Manual definitions: Responsible means able to complete the contract in accordance with its requirements, including but not limited to requirements pertaining to experience, moral integrity, operating capacity, financial capacity, credit , and workforce, equipment, and facilities availability. Responsive means conforming in all material respects to the terms and conditions, specifications, legal requirements and other provisions of the request.
How to Calculate Thresholds For Purchasing Method Commodity-Based Based on aggregation of all purchases and anticipated purchases for the year (or contract period) for the provision or performance of any goods or services (whether one or more vendors) Pay-To-Play Vendor-Based Threshold ($17,500*) is based on the aggregation of a single vendor s cumulative contracts in any 12-month period. *current as of 02-18-2018
Note: An older document, link doesnt work. Working link at: http://www.nj.gov/dca/divisions/dlgs/resources/poli_docs/decision_tree.pdf
From State Library Website Threshold Amount (reflects both the 7.1.10 and 1.1.11 changes. Without Qualified Purchasing Agent (most libraries) With Qualified Purchasing Agent (QPA) Aggregation Basis Library Materials Status NOTES NJSL recommends that the library work closely with a QPA as this is a very complex process. There are two exceptions: (1) Emergencies affecting public health, safety and welfare: adopt resolution and file report with DLGS OR (2) Single Source: apply for State Treasurer approval through DLGS. Aggregation based on the provision or performance of any goods or services (whether one or multiple vendors) Library materials/services exempt from bidding* (NJSA 40:54-1 and NJSA 40A:11-5 (1 )(q)) but subject to Pay-To-Play and Business Registration Certificate thresholds. Bid Threshold $17,500 $40,000
From State Library Website Threshold Amount (reflects both the 7.1.10 and 1.1.11 changes. Without Qualified Purchasing Agent (most libraries) With Qualified Purchasing Agent (QPA) Aggregation Basis Library Materials Status NOTES Aggregation based on the provision or performance of any goods or services (whether one or multiple vendors) Library materials/services exempt from bidding* (NJSA 40:54-1 and NJSA 40A:11-5 (1 )(q)) but subject to Pay-To-Play and Business Registration Certificate thresholds Quote equals 15% of the bid threshold. If practicable, solicit at least two competitive quotations from vendors for goods and/or services. Quote $2,625 - $17,499 $6,000 - $39,999
From State Library Website Without Qualified Purchasing Agent (most libraries) With Qualified Purchasing Agent (QPA) Threshold Amount (reflects both the 7.1.10 and 1.1.11 changes. Aggregation Basis Library Materials Status NOTES Use Of Sound Business Judgment Aggregation based on the provision or performance of any goods or services (whether one or multiple vendors) Library materials/services exempt from bidding* (NJSA 40:54-1 and NJSA 40A:11-5 (1 )(q)) but subject to Pay-To-Play and Business Registration Certificate thresholds USBJ applicable to any amount less than 15% of the bid threshold. There is no statutory requirement for solicitation of quotations. Follow the library board's policies. Less than $2,625 Less than $5,400
Sample Local Finance Notice (Page 1 only)
Policies for Municipal Libraries Purchasing Manual Purchase Requisitions Purchase Orders Vouchers Cash Management Policy Board Resolution Appointing Purchasing Agent (QPA or not) If you don t have these, you can start with your town model.
Sample flow of paperwork when you need to purchase something AFTER the whole pay to play and price comparison process 1. Purchase Requisition / Encumber Funds 2. Purchase Order (with or without a vendor contract or agreement) order the goods 3. Library Certifies Receipt of Goods (on Purchase Req copy works) 4. Issue a voucher vendor certifies they supplied goods and you certify funds are available to pay the vendor 5. Now you can send the check
Voucher System Sample Process Treasurer of the library board certifies to the board at the monthly meeting that sufficient funding is available in the budget for the purchases on the bills list (list of purchase orders) Assuming the board approves the bills list, the treasurer countersigns the POs POs are returned to the Purchasing Agent (may be municipality) for processing
You will encounter resistance to purchasing procedures
Your Level of Involvement Varies 5. 4. 3. 2. 1. Are you an association library? Does your municipality/county handle the purchasing function for your library? Does your municipality/county pay your bills? Do you use an automated purchasing system? Do you encumber funds before ordering?
Local Agency Procurement Laws NJSA 40A:11-1 governs the award of contracts for services for boards and public entities including municipal, joint and county libraries. Association libraries (non-profits) do not have to comply, but may want to as a best practice since they accept public funding. Resources: NJ Local Agency Procurement Laws http://www.state.nj.us/dca/divisions/dlgs/programs/lpcl.html
All this is very nice but how do you actually do this stuff?
Sound Judgement I do exactly the same process as for quotes. Why? Why not? Might end up with higher number than anticipated avoids redoing work.
Pay to Play documents and more on State Library Website https://www.njstatelib.org/services_for_libraries/resour ces/library_law/
Exceptions To Parts of This Process Emergencies affecting public health, safety and welfare adopt a resolution and file a report with the Division of Local Government Services Single Source (rare) apply for State Treasurer approval through the Division of Local Government Services Professional services Extraordinary unspecifiable service Acquisition of artifacts of other items of unique intrinsic, artistic or historical character Insurance Library and educational good and services Expenses for travel, conferences More
Purchases Exempted By NJSA 40:54-12.1 and NJSA 40:33-8.1 The board of trustees (The county library commission ) may, within the limits of funds appropriated, purchase the following without advertising for bids: Library materials including books, sound recordings, videos, and audiovisual materials; Necessary rebinding; and Specialized library services (NJSA 40:54-12.1) 1. 2. 3. Specialized library services must be determined cautiously digitization may qualify, but an integrated library system does not seek the advice of a QPA or the Division of Local Government Services
Pay-To-Play Applies to Exceptions Chapter 271, P.L. 2005 and Chapter 19, P.L. 2004 (as amended by P.L. 2005, c.51); N.J.S.A. 19:44A-20.4 et seq. Applies to any aggregate amount per vendor of $17,500 or more per year or contract period and this includes library materials For information see: http://www.state.nj.us/dca/divisions/dlgs/resources/poli_docs/ p2pguide.pdf
Common Library Challenges / Ideas Cleaning services Integrated Library System (ILS) HVAC work Third party provider of utilities (utilities are exempt from bid process but not if you use a third party) The donation, sale, installation or maintenance of equipment or facilities for use of the contracting unit is one of many Concessions so is a public copy machine. The granting of a right to act for or on behalf of the contracting unit or to .. May involve a payment or exchange. . Vending machines excluded. Before you accept a donation of old computers, for example, have to pass a resolution authorizing the procurement of a concession. See Page 103 of LPCL manual. Can purchase at 10% less than a state cooperative contract price if you jump through some hoops Community Room Chairs order from a state contract Office Supplies Staples has a plan on state contract Amazon.com issues
Ineligible Expenditures Gifts, scholarships, donations Debt service Lease payments on equipment or software exceeding five years Costs that exceed the actual or fair market value of the goods or services provided Rent paid to the municipality for library use of municipal facilities or equipment Capital expenses not meeting the criteria as defined in N.J.A.C. 15:21-12.5 (c)
Hiring Professionals Attorneys, engineers, architects, etc. must all file a Business Registration if the professional services are over the 15% bid threshold Bidding is not required (NJSA 40A:11-5 (1)(a)(i)), but it is best to use the Competitive Contracting procedure as found in NJSA 40A:11-4.1 for hiring professionals (also see the administrative code at NJAC 5:34-4.1 et seq.) Pay-to-Play laws must be followed if not using a bid process and if spending above the $17,500 threshold
Resolution for Hiring Professionals "The governing body shall in each instance state supporting reasons for its action in the resolution awarding each contract and shall forthwith cause to be printed once, in the official newspaper, a brief notice stating the nature, duration, service and amount of the contract, and that the contract is on file and available for public inspection in the office of the clerk..."
Sample Newspaper Notice for Contract Award The following is a sample resolution for publishing Notices of Contract Award for Professional Services. Professional Services - Local Notice of Contract Award The (name of the local government unit) has awarded a contract without competitive bidding as a professional service pursuant to N.J.S.A. 40A:11- 5(1)(a)(i). The contract and the resolution authorizing it are on file and available for public inspection in the office of (municipal clerk/library director) Awarded to: _____________________________________________ Duration: _____________________________________________ Nature and type of contract: _________________________________ Amount of Contract*: _________________________________ *Indicate by dollar value of contract, per hour/per occurrence, pursuant to schedule of rates/fees contained in the contract
State Contract and State Cooperative Purchasing A good place to start is Treasury s FAQ on this subject (http://www.state.nj.us/treasury/purchase/coop_faq.shtml) You may search by vendor or specific product or service If a vendor states they are on State contract, check to make sure this is true for the item you are purchasing Using this method eliminates the need for the library to obtain bids, quotes, the business registration but often comes with a higher cost than you can get yourself.
Alternate Methods of Purchase: Competitive Contracting (NJSA 40A:11-4.1 ) Law states CC can be done only by a QPA, Attorney or Administrator. Opinion obtained from a purchasing consultant in February 2018 was that a library director could be considered the administrator of the organization. If you want to do CC and are not a QPA, recommend you get your own opinion from your own attorney or auditor. Purchasing integrated library system which would exceed the bid threshold. Concessions for example, receiving funding from a book rental service in an amount exceeding the bid threshold might use competitive contracting.
Before and After Two Easy Actions (or are they .)
Business Registration Program PL. 2004, c.57 affects purchasing of goods and services over $2,625 without a QPA* (vendor s cumulative contracts not aggregation by type of goods or services) Library materials are not exempt Only required to obtain one time unless business address changes or institute a bidding process For instructions on implementing the law see: http://www.state.nj.us/dca/divisions/dlgs/programs/lpcl.html#1 * As of 2-19-2018
1099s Run report of all cumulative payments $600 or more in any calendar year. Send W-9 to vendors (if not already obtained) -- get newest form off IRS website Issue to: LLCs (unless treated as S or C corp check with your auditor***) Attorneys Performers / speakers Labor charges over $600 (materials or items exempt) If the vendor is a corporation (Inc., PA) they don t need one. Issue no later than January 31 each year Send forms to IRS If you have tons of these to do (like performers) software does all for you is less time-consuming you can get from Staples or another office supply source. https://www.irs.gov/pub/irs-pdf/i1099msc.pdf for full information.
I checked with my auditor. Response used with permission. Great question!! I ve had several conversations with the IRS over the years about this topic and the following has been relayed to me: Each state has different laws governing the creation and structure of LLCs. In some states, the structure and tax reporting of an LLC mirrors that of an S or C corporation. For these entities, a Form 1099 would not be required unless they were providing legal services (or one of the other listed exemptions in the IRS Code). In New Jersey, however, LLCs operate and report similarly to a sole-proprietor or partnership entity in the sense that they either file a Form 1040 or 1065 at year end, and not a Form 1120 like an S or C Corporation. Therefore, the IRS treats these entities as if they were a sole-proprietor or partnership and would require 1099s be issued to them assuming it was for a service and over the $600 threshold. Later verbal comment: Clear as mud.
Purchasing Essentials: Summing Up Local Public Contracts Law governs the award of contracts for materials and services for boards and public entities (NJSA 40A:11-1) Know the legal thresholds for when to use the sound business judgment, quote, or bid procedure Be aware that the municipality/county may have a cooperative agreement in which the library may participate and/or that there may be a state contract available for the particular goods you seek - http://www.state.nj.us/treasury/purchase/pricelists.shtml You can join coops by Board resolution Library materials and specialized library services are exempt from the bid and quote process (NJSA 40:54-12.1), but not the Business Registration Program Note that the purchase of an Integrated Library System requires the competitive contracting procedure or bid
2 Useful Tools 1 to get 1 to get rid
Procurement/Purchasing Card Municipal, county and joint municipal libraries may accept credit cards as a form of payment, but may not use a credit card, debit card, in-house or store credit card to pay vendors. Procurement cards are permitted but difficult to obtain. Local Finance Notice 2013-17 at http://www.state.nj.us/dca/divisions/dlgs/lfns/13/2013-17.pdf Requires a resolution, training of personnel, appointment of program manager, controls in accordance with law and policies and procedures must be in place A workaround may be permitted by your auditor if the intent of the law is respected.
Policy Approved by Library Attorney and Auditor Library of The Chathams Procurement Card Policy Revised March 5, 2014 The library debit/procurement card will be used only for online purchases, such as recurring charges that cannot be paid for in another acceptable manner. A separate account will be maintained for purposes of making online purchases in this manner. At no time will more than $500 be available in the account.
Discarding/Selling Government Property Rule of Thumb: Discard the same way you acquired. Estimated fair value of the property or group of items to be sold at the same time is: Below 15% of the bid threshold, item(s) may be disposed of as deemed appropriate for a government entity - trash, recycle, given to association library or sold at private sale without advertising for bids (NJSA (40A:11-36 (6)). Equal to or over 15% of the bid threshold and the purchaser is another government entity, a mutually agreeable price is negotiated and both units pass resolutions verifying the sale. Equal to or over 15% of the bid threshold and the purchaser is NOT another government entity, publically offer the item/s through a sealed bid or auction process by live auction or an on-line auction. https://www.govdeals.com/
Solves the problem of patrons / staff / board asking for equipment Library Van Card Catalog Community Room Chairs (100) Copy Machine
