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10.06.01 Process for Change Orders Policy 10.06.01 – Process for Change Orders Page 1 of 4 CITY OF BOYNTON BEACH, FLORIDA ADMINISTRATIVE POLICY MANUAL CHAPTER: 10 Purchasing POLICY NO: 10.06.01 SECTION: 06 Change Orders PAGE: Page 1 of 4 SUBJECT: 01 Process for Change Orders PURPOSE: When staff estimates that costs may or will exceed the Purchase Order or Contract, Procurement Services should issue a Change Order prior to approving the increase and making the invoice payment. Change Orders will generally modify the original terms of the Purchase Order to coincide with the actual details of the delivered order, or in the case of construction projects, it will modify the Purchase Order to the proposed revision to the Schedule of Payments. Change Orders are necessitated when unforeseen circumstances arise that were not contemplated at the time of awarding the Purchase Order or Contract. POLICY: Vendor invoices will have a tolerance of 10% of the Purchase Order amount. These invoices can be processed through Accounts Payable without Purchasing having to prepare a Change Order to the original Purchase Order. If the tolerance limit of 10% is exceeded, Accounts Payable will notify the originating department to coordinate a Change Order through Purchasing prior to the payment of the invoice. Departments should not automatically issue a Change Order in order to pay an invoice in excess of the original Purchase Order, which is a unilateral contract to provide commodities or services for a certain price. Any changes should warrant careful scrutiny and approval of the department head with a full explanation prior to requesting the Change Order. Appropriate staff persons should review and approve a Change Order prior to incurring the additional change in cost and making invoice payment for the following purposes: For construction Change Orders, the Department Head, City Engineer, or outside Engineer will initiate the Change Order subject to the City Commission's approval. Finance and Purchasing must be notified of any construction Change Orders. The Assistant Public Works Director must approve any estimate or invoice for Fleet Services vehicle repairs that exceeds 10% of a Purchase Order before issuing any Change Order. Policy 10.06.01 – Process for Change Orders Page 2 of 4 1. Construction Projects Initially Approved by Commission: A. Construction Projects Approved With Contingency Funding If Commission awards the construction project with a contingency allocation, then no further Commission action is necessary provided the construction project does not exceed the project budget (awarded contract + contingency funding). However, the City Commission must approve Change Orders that exceed the project budget before incurring the additional cost. The City Manager, or designee, will administratively review and approve all Change Orders. Upon completion of the construction project, the Project Manager shall reconcile all adjustments to the original contract and shall prepare an administrative Change Order to adjust the final value of the contract and present to Commission for approval. Although staff recognizes contingency funding for budgetary purposes, it will not be included in the construction Contract (nor the Purchase Order). The City shall issue the construction contract for the dollar value of the bid award. Therefore, in order to modify the Purchase Order amount it is necessary for the Project Manager to request a Change Order. The Change Order request will recap the adjustments and identify the dollar value of the Change Order and should balance to the dollar value of changes shown in the Schedule of Payments. B. Construction Projects Approved Without Contingency Funding. For all construction projects approved by Commission without contingency funding the following will apply: (Based upon cumulative Change Orders) Less than $10,000 requires Department Head approval. $10,000 to $24,999 requires City Manager approval. $25,000 or more requires City Commission approval. For construction change orders, the Department Head, City Engineer, or outside Engineer will initiate the change order subject to the City Commission's approval. Finance and Purchasing must be notified of any construction change orders. The Assistant Public Works Director must approve any estimate or invoice for Fleet Services vehicle repairs that exceeds 10% of a purchase order before issuing any change order. Staff will only present Change Orders to Commission for approval when cumulative Change Orders reach $25,000 or more. The request for approval shall include all cumulative Change Orders that make up the cumulative Change Order of $25,000 or more. If, after Commission approval, additional Change Orders are required, Policy 10.06.01 – Process for Change Orders Page 3 of 4 staff shall follow the same process for the next cumulative set of Change Orders reaching $25,000 or more. Staff shall submit the Change Order request to the Purchasing Agent in a memorandum providing: • narrative on the Change Orders (with copies of the supporting Change Orders); • dollar value of the requested Change Order; • reference to the purchase order number; and • identification of an approved funding source. Upon review, Procurement Services will make the necessary change to the Purchase Order; make a photocopy of the Change Order for their records, and forward a copy of the Change Order to the City Clerk placement in the bid file. 2. Normal purchase orders over $500 will have a tolerance of 10 percent of the Purchase Order amount up to $200. Accounts Payable can process the invoices for these Purchase Orders without Procurement Services preparing a Change Order. Invoices, which exceed the tolerance limit, will require the originating department to review the discrepancy and request in writing (or e-mail) a Change Order from Procurement Services prior to the invoice payment. The Change Order request shall justify the cause for variance. 3. Blanket Purchase Orders can have an adjustment (increase or decrease) to the Purchase Order amount for a related department and account number by written memorandum (or e-mail) request to the Procurement Services. This internal process will allow for timely invoice payments associated with the blanket Purchase Order. Items purchased from a blanket Purchase Order shall be restricted to the account codes identified and allocated on the blanket purchase order. The blanket Purchase Order is for small repetitive purchases against the identified account code and is not for one-time purchases. The blanket Purchase Order cannot be $25,000 or more without bid reference. For blanket purchase orders that are anticipated to exceed the bid threshold, it is the responsibility of the department to provide a request for proposal, or a bid reference to be used on the blanket Purchase Order. Procurement Services will provide necessary assistance to the department in preparing a bid. Refer to Purchasing APM Chapter 10.4.01 for further details on blanket Purchase Orders. 4. Professional Services Contracts are a negotiated contract prior to rendering services to the City. Change Orders will require approval of the City Commission. All change orders are to be forwarded to Procurement Services for proper review, Policy 10.06.01 – Process for Change Orders Page 4 of 4 and processing in order to change the Purchase Order amount. Change Orders will be distributed to the holders of the original Purchase Order. If there are any questions as to the procedure for processing a particular Change Order contact should be made with Procurement Services. DEVELOPED BY: Procurement Services EFFECTIVE DATE: April 15, 1998 REVISION DATE: May 1, 2003 REVISION DATE: February 1, 2009 Kurt Bressner Kurt Bressner City Manager