Chapter 16 PROCUREMENT. Procurement through NMSA Purchasing Discounts 13-1A-1 through 13-1A-4 NMSA 1978

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1 Chapter 16 PROCUREMENT No, this is not what it looks like. It is the purchasing of materials, supplies and services for use by a municipality. The procedures are outlined in the statutes. Procurement through NMSA 1978 Purchasing Discounts 13-1A-1 through 13-1A-4 NMSA 1978 Freight Bills NMSA 1978 Public Works Contracts through NMSA 1978 These are the sections in the statutes that deal with public purchases of goods and services. The most important sections to understand are the definitions contained in through , NMSA If you read the definitions and understand them, 99% of understanding the entire code is done. The procurement code is indexed clearly in the statutes, so that any question that should come up is easy to locate in the code. Each municipal governing body, by resolution, adopts its own purchasing policies and procedures concerning small purchases, those under $20,000. Over $20,000, the state Procurement Code must be followed, and all competitive bids or proposals are to be sealed. They must be opened at a designated time, in a public opening. CHIEF PROCUREMENT OFFICER Each local public body shall designate a Chief Procurement Officer (CPO) who shall be certified in accordance with the state purchasing certification program. Every CPO shall be recertified every two (2) years. On or before January 1 of each year, and every time a CPO is hired, each local public body shall provide to the state purchasing agent the name of the local public body s CPO. As of July 1, 2015, only certified CPOs may do the following: (1) Make determinations, including determinations regarding exemptions, pursuant to the Procurement Code; (2) Issue purchase orders and authorize small purchases pursuant to the Procurement Code; and (3) Approve procurement pursuant to the Procurement Code. 16-1

2 The only exception to the above is that persons using procurement cards may continue to issue purchase orders and authorize small purchases. SMALL PURCHASES ( ) A. A central purchasing office shall procure services, construction or items of tangible personal property having a value not exceeding sixty thousand dollars ($60,000), excluding applicable state and local gross receipts taxes, in accordance with the applicable small purchase rules adopted by the secretary, a local public body or a central purchasing office that has the authority to issue rules. B. Notwithstanding the requirements of Subsection A of this section, a central purchasing office may procure professional services having a value not exceeding sixty thousand dollars ($60,000), excluding applicable state and local gross receipts taxes, except for the services of landscape architects or surveyors for state public works projects or local public works projects, in accordance with professional services procurement rules promulgated by the Department of Finance and Administration, the General Services Department or a central purchasing office with the authority to issue rules. C. Notwithstanding the requirements of Subsection A of this section, a state agency or a local public body may procure services, construction or items of tangible personal property having a value not exceeding twenty thousand dollars ($20,000), excluding applicable state and local gross receipts taxes, by issuing a direct purchase order to a contractor based upon the best obtainable price. D. Procurement requirements shall not be artificially divided so as to constitute a small purchase under this section. PURCHASES AT OR ABOVE $20,000 To purchase goods or services (except services defined as "professional services" by ), a municipality requests competitive sealed bids or competitive sealed proposals. Competitive sealed proposals may be requested for purchase of services at any time the purchasing agent determines that seeking competitive sealed proposals would be in the best interest of the municipality. NONTAXABLE TRANSACTION CERTIFICATES (NTTC) The NTTC is the only acceptable substantiation for certain deductions. The buyer obtains an NTTC from the Department to give to a seller. The NTTC entitles the seller to deduct those receipts when determining taxable gross receipts. In practice, this means the buyer is able to purchase goods and services free of the gross receipts tax that is usually passed on to the buyer. The seller must accept an NTTC in "good faith", reasonably assured that the buyer executing the NTTC will use the property or service in a nontaxable manner. The seller needs only ONE NTTC from each buyer to cover all transactions of the same type with that buyer. Resale certificates issued by other states are not valid in New Mexico. All taxpayers who wish to execute NTTCs are required to: 1) register with the Taxation and Revenue Department, and 2) complete the Application for Nontaxable Transaction Certificates or apply on-line. When purchasing products or doing business an NTTC certificate must be generated for the seller/buyer to conduct business. This ensures you are charged the correct amount of tax- as a governmental entity you are exempt. These certificates are generated on the website. You will need their CRS number and origin of the business as there is an in state and out of state option for the execution of these certificates. 16-2

3 COMPETITIVE SEALED BIDS Here are steps to follow in dealing with competitive sealed bids: 1. Set your specifications carefully. Designate only that item that you want. You can specify brand names if there is more than one vendor able to bid on the item. You can also designate "brand name or equal" specification. 2. Request permission from the governing body to advertise the invitation to bid to the public. 3. Publish in at least the local newspaper and at the most in the major metropolitan newspapers for items difficult to find locally. Publication is necessary for at least ten (10) calendar days. On complicated items, longer publication can be made. 4. In your specifications and publication, note the time and place all sealed bids will be opened. 5. At bid opening time, request any additional bids from bidders present, and announce the closing of the bid. DO NOT ACCEPT ANY BIDS AFTER ANNOUNCEMENT OF BID CLOSING. 6. Open all bids and have them reviewed by the department requesting the item, or by the purchasing agent or department. 7. Reject all bids in writing that do not meet specifications. Consider only those bids submitted that meet specifications. 8. Make a recommendation based on review of all bids submitted to the governing body for selection of purchase. 9. Between bid opening time and recommendation to your governing body, discussion can be had with each bidder for any clarification; however, no item can be changed in price. 10. Bid documents are not public records until a bid selection is made by the governing body. 11. Make your selection based on the bidder supplying the proper item fitting specifications at the lowest available price. 12. When in doubt, call State Purchasing Division at (505) for direction. REQUEST FOR PROPOSALS There are certain times when a request for proposal would be more appropriate than a bid process. Check the Procurement Code sections through Examples of proposals would be for professional services, or tangible items to be purchased that may be complicated with contractual terms. A computer system would be a tangible item that could be purchased under a request for proposal, since you may be also purchasing maintenance contracts included with the purchase of equipment. 16-3

4 Professional services over $30,000 are required to be placed on Request for Proposal (RFP), but you may determine to request proposals for those services under that amount. Your audit contract is to be an RFP, unless under $30,000. An exception is if federal funds are to be audited, then the ceiling is $5,000. Services you may wish to purchase are not considered "professional services" unless they are listed in ; if the service you wish to purchase is not listed specifically or "similar" to those listed, then the floor for complying with the Procurement Code is $20,000. Certain professional services (those of architects, engineers, landscape architects and surveyors) require a special kind of proposal called "competitive sealed qualifications-based proposals" (See through ). A Request for Proposal is not awarded solely on a cost basis, but a rating criteria established in the proposal form. Separate values are set to different portions of the proposal and used to establish a ranking system for selection. Cost may be a separate value or may be completely ignored in the process. Your own system determines the values for criteria based on what your municipality feels is important to the purchase. Follow the same procedures as a Request for Bid in publication, etc., when using a Request for Proposal. LEASES AND LEASE PURCHASES Leases are contracts which procure the use, but not ownership, of real or personal property (or, sometimes, even use of personnel) for the length of time stipulated in the lease. Lease purchases are contracts which procure the use of real or personal property but also apply all or a portion of the lease payments to eventually acquire actual ownership of the property. Lease You may lease equipment, property or any tangible item within any fund available; however, the lease must not provide for later purchase under the same contract and there is a requirement for a nonappropriation clause in the contract. A non-appropriation clause provides that, if the governing body as the board of finance decides to not fund the lease in a following year, the municipality is held harmless for future payments and control of the property returns to the vendor. Follow your purchasing guidelines for a lease as well as a purchase. Lease Purchase Montano v. Gabaldon, S.Ct. No , is a Supreme Court ruling from January 1989, that states an agency of state government, including municipalities, may NOT enter into long term financing (over one fiscal year) through a lease purchase agreement without the purchase's being submitted to the voters for approval. This would be a clear violation of the Bateman Act ( ). 16-4

5 Although this case decision ruled lease purchase agreements financed from general revenues to be unconstitutional, lease purchases from restricted funding sources have been ruled permissible. Such restricted funding sources include the Fire Fund, EMS Grant Fund, enterprise funds or other similarly restricted funds. Prior to entering into a lease purchase agreement for your municipality, verify with Local Government Division (and possibly your municipal attorney) that the funding to be used meets the definition of "restricted." Follow your purchasing guidelines for lease purchase of items. 16-5