Purchasing for the University Tricia Massey Staff Training and Development Unit

1. Purchasing for the University Tricia Massey Staff Training and Development Unit Head of Purchasing Friday 26 November 2010

2. Course Content: Risks and Challenges Purchasing Regulations and Procedures (including financial thresholds) Roles in Purchase-to-Pay Process Methods of Purchase Accounting for VAT on Purchase Orders Importing Goods Basic Purchasing Law Sale of Goods Act Value for Money Green Purchasing Staff Expenses Q&A (Charles Gray, Payments Accountant)

3. Question? Feel free to ask! Issue? Feel free to share! Bad experience? We’re all ears! (remember feedback forms)

4. Purchasing for the University Other Training for Users Qfis Purchase Order Processing: facilitated by Financial Systems, in conjunction with the Purchasing Office (contact Qfis Helpdesk for information – email qfis@qub.ac.uk / ext 5055) Purchasing Card: ‘Using Your Purchasing Card’ course facilitated by the Purchasing Office, in conjunction with Staff Training & Development Unit (see STDU programme for information)

5. Purchasing for the University Information Sources • Purchasing Website – guidelines, regulations, procedures, systems and contracts • Queen’s Now / Weekly Round-up – information on new contracts, developments and other items of ‘purchasing news’ • Workshops, roadshows, ‘meet the supplier’ events, user events eg away days for travel bookers • School/Directorate Briefing Sessions – advice on key issues and interaction with Purchasing team

6. Risks and Challenges

7. Purchasing for the UniversityRisks and Challenges What is Queen’s University Belfast in the purchasing context? • body governed by public law - EU Directives (Public Contracts Regulations 2006 (as amended) and associated case law • its procurement activities must follow the Rules and Principles of the EC Treaty – ie all suppliers must have same degree of non-discrimination, equal treatment, transparency, proportionality and mutual recognition

8. Purchasing for the UniversityRisks and Challenges What does this mean for Queen’s? • Must ensure that adequate control arrangements are in place • Non-compliance with public procurement legislation leads to… • Public accountability issues – perceived misuse of taxpayers’ money • Possible legal challenges from unsuccessful suppliers following award decisions • Reputational risk • Financial risk

9. Purchasing for the UniversityRisks and Challenges What the University does to Reduce Risk:- • Clearly documented, robust procurement policies and procedures • Formal approval and reporting procedures • Appropriate systems – Qfis, pcard programme, inventory • Expenditure monitoring, analysis and benchmarking • Professional purchasing expertise and experience • Procurement strategies – regularly reviewed • Training / CPD • Availability of specialist legal advice

10. Purchasing for the UniversityRisks and Challenges What you can do to Reduce Risk: • ‘Intelligent Action’ - ask for advice before engaging in a purchasing process • ‘Bigger Picture’ - consider the implications of what you are thinking of doing and act accordingly • ‘Keep Yourself Informed’ – ensure that you keep up to date with purchasing regulations and requirements • ‘Cover Your Tracks’ – ensure that your actions can stand up to scrutiny – your actions are auditable and almost everything is discoverable under FOI* (* Freedom of Information Act 2000)

11. Purchasing Regulations and Procedures

12. Purchasing for the UniversityPurchasing Regulations and Procedures The Rule:- Any goods, services or works purchased via the University’s accounting system, using general funds, research funds or otherwise, must comply Joint Appointees / Jointly Funded units – if funding is channelled through the University’s accounting system, regardless of the source, then the purchase must comply

13. Purchasing for the UniversityPurchasing Regulations and Procedures Contracts/formal supply arrangements must be used where possible – see www.qub.ac.uk/directorates/FinanceDirectorate/Purchasing/ContractsBuying

14. Purchasing for the UniversityPurchasing Regulations and Procedures Examples of reluctance to use contracts: Comment: I can get a better (cheaper) deal by going to my chosen supplier Response: Best value is not always about cheapest price. There are other (qualitative) considerations. Also, the initial cost may increase when the whole life cost (eg maintenance etc) is taken into account. Further, all contracts are covered by stringent terms and conditions which govern the performance of the contracted supplier.

15. Purchasing for the UniversityPurchasing Regulations and Procedures Examples of reluctance to use contracts: Comment: I had a bad experience with that supplier and don’t want to use it. Response: If any issues were not brought to the attention of the Purchasing Office at the time, nor were they recorded or the supplier brought to task, there is little that can be done. Unless a supplier has been penalised for poor performance, it cannot legitimately be excluded from supplying to the University. If it is necessary to use that supplier then instead, the required level of performance, and any other specifics, should be agreed prior to undertaking the transaction.

16. Purchasing for the UniversityPurchasing Regulations and Procedures Examples of reluctance to use contracts: Comment: I need something which is not the same specification as, or is more expensive than, the contract item Response: All such requests will be considered as long as a valid justification is provided. Technical expertise will be sought where deemed necessary (eg from Information Services)

17. Purchasing for the UniversityPurchasing Regulations and Procedures Examples of reluctance to use contracts: Comment: I need something urgently and the contractor can’t supply it or the item is not available from the contractor. Response: The requestor will be asked to confirm this in writing, however, it is likely that the Purchasing Office will verify this with the contractor. As a rule, such situations would be monitored and Purchasing will work with the contractor to expedite deliveries / extend product/service ranges where possible.

18. Purchasing for the UniversityPurchasing Regulations and Procedures Purchasing Thresholds for non-contract items • £2,500 to £10,000 exc VAT – three written quotes • £10,000 to £30,000 exc VAT – four written quotes (see handout – ‘Guide to Seeking Competitive Quotations’) • Over £30,000 exc VAT – must be tendered • Over £156,442 exc VAT – must be tendered in Europe (see handout on timescales) All tenders – talk to Purchasing as early as possible!

19. Purchasing for the UniversityPurchasing Regulations and Procedures Calculating Thresholds: • Look at likely spend over period of requirement • Use aggregated total to determine whether quotations or tenders are required • If unsure of contract period, use maximum of 4 years (48 months) Example: Consultant required 2 days per week for 12 weeks costing £500 per day, hence: 2 x 500 x 12 = £12,000 - requires four written quotes

20. Purchasing for the UniversityPurchasing Regulations and Procedures Thresholds apply to: • Single purchases • Multiple quantity of the same item • Total value of similar items within a generic description • Aggregated total anticipated spend over period of requirement (maximum 48 months) Do not apply to: • Items grouped together on an order for convenience Possible exceptions to requirement for competitive process –single or limited source of supply, equipment upgrades, compatibility requirements, etc

21. Purchasing for the UniversityPurchasing Regulations and Procedures Possible reasons for single or limited source of supply (quotes or tenders): • Patented design • Upgrades to existing equipment (available only from manufacturer) • Compatibility – existing equipment or collaborative research • Software – unless available from a source other than its creators In all cases, there must be a sound justification.

22. Purchasing for the UniversityPurchasing Regulations and Procedures For tenders which are deemed ‘sole source’: • Purchasing will advise on most appropriate means of competition • Tendering exercises conducted where possible to test the market • Purchases over tender threshold should never go ahead without the involvement of Purchasing

23. Purchasing for the UniversityPurchasing Regulations and Procedures Specifying your requirements:- • Input/Prescriptive specification (details features of item) • Output/Performance specification (details features of result) – use where unsure of, or unable to specify, requirement. Remember: • Give a clear explanation of your requirements but don’t ‘lock out’ any potential suppliers by producing too detailed a spec. • When buying equipment, never use a supplier’s technical specification as your own

24. Purchasing for the UniversityPurchasing Regulations and Procedures • Quotation and Tender evaluation process - must stand up to the most rigorous of scrutiny in the event of a legal challenge • Remember, asking supplier to bid implies willingness to deal if bid wins • Suppliers (non-EU competitions) entitled to de-brief within 15 days of being advised that unsuccessful • Standstill period (EU competitions) requires ‘characteristics and relative advantages’ of winning bid to be disclosed to all unsuccessful applicants

25. Roles in Purchase-to-Pay Process

26. Purchasing for the UniversityRoles in Purchase-to-Pay Process Nominated Buyer’s Responsibilities:- • Five R’s – to ensure that the right quantity of the right goods is purchased at the right time at the right price and delivered to the right place • To ensure that purchasing regulations and procedures are followed • To make colleagues aware of contracts and to ensure that they are used • To approve orders up to £2,500 exc VAT

27. Purchasing for the UniversityRoles in Purchase-to-Pay Process Authorised Signatory’s Responsibility:- • To approve the commitment of funds from a budget (project code) by signing a paper (Qfis) requisition - whereas a Nominated Buyer approves the resultant order on Qfis

28. Purchasing for the UniversityRoles in Purchase-to-Pay Process Segregation of duties = the person who authorises commitment of funds on a requisition should never authorise the invoice for payment In some cases, a Nominated Buyer may also be an authorised signatory. If so, he/she can approve the order on Qfis but can only authorise the requisition to raise the order OR authorise the invoice for payment

29. Purchasing for the UniversityRoles in Purchase-to-Pay Process

30. Purchasing for the UniversityRoles in Purchase-to-Pay Process Order approval requirements above £2,500 ex VAT: £2,500 - £10,000: Buyer £10,001 to £50,000: Senior Buyer £50,001 to OJEU threshold: Purchasing Manager Above OJEU threshold: Head of Purchasing Additional requirements for approval by Director of Finance on behalf of University Operating Board: Non-compliant orders over £50,000 All orders over £100,000

31. Purchasing for the UniversityRoles in Purchase-to-Pay Process ‘Non-compliant’ denotes an order, in respect of which, a competitive process has either been undertaken incorrectly or not at all. All orders requiring approval by the Director of Finance require a ‘Report on Order’ to be produced by the Purchasing Office. Orders cannot be approved by Purchasing until they have been approved by the Director of Finance, who may seek from the originator further clarification or information on the circumstances of the order.

32. Methods of Purchase

33. Purchasing for the UniversityMethods of Purchase Two main methods of purchase:- • Qfis – Purchase Order Processing (‘POP’) • Purchasing Card (‘pcard’) Other methods are less commonly used in the purchase of goods and services (see handout ‘Guidelines on Processes for Undertaking Purchases’)

34. Purchasing for the UniversityMethods of Purchase Qfis – Purchase Order Processing (‘POP’) • Requisition – source document - must be signed by authorised signatory for project code(s) (remember your purchasing practices may be audited!) • Order created electronically by ‘Qfis clerk’ and approved by Nominated Buyer or Purchasing team. If Qfis clerk is in doubt that rules have been followed, they should refer to the Nominated Buyer. • Authorised signatories on all orders (‘accountable’) are checked by Purchasing

35. Purchasing for the UniversityMethods of Purchase • Nominated Buyers should only approve orders if satisfied that rules have been followed – if in doubt, challenge! • Orders can only be approved by Purchasing if appropriate supporting paperwork (eg quotes) has been received from originator – fax or email! • A comment should be added to the ‘notes’ screen advising the whereabouts of any supporting paperwork - including the method of issue, the date sent and who it was sent to, or, if the paperwork is still to be issued, the date on which its issue is expected.  Qfis POP

36. Purchasing for the UniversityMethods of Purchase Following best practice: When raising orders to the same supplier:- • do include goods/services with different specifications, dates of requirement, etc • do include items with different accounting requirements - product code, project code, VAT code, etc Qfis POP

37. Purchasing for the UniversityMethods of Purchase When raising orders:- • don’t raise an order for each requisition received on the same day to the same supplier – forward plan where possible • don’t intentionally split orders to bring individual values below the Nominated Buyer threshold • don’t communicate requirements to supplier – this will result in a Confirmation Order Qfis POP Qfis POP

38. Purchasing for the UniversityMethods of Purchase Avoiding confirmation orders: • Standing orders (delivery of same quantity of item(s) each month) – eg bottled gas • Blanket orders (delivery of item(s) on an ‘as required’ or ‘call-off’ basis) – eg travel • Purchasing card (can be used for most commodities – use for high volume, low value transactions where possible) (see handout – ‘Guidelines – Confirmation Orders’) Qfis POP

39. Purchasing for the UniversityMethods of Purchase Pre-payment: University’s policy not to pre-pay for goods or services but may be necessary if: • Requirement is a ‘one-off’ and University doesn’t have account with supplier • Contract (eg scientific equipment) is subject to stage payments If significant amount, pre-payment only made subject to receipt from supplier of banker’s Letter of Guarantee (Purchasing will advise) Qfis POP

40. Purchasing for the UniversityMethods of Purchase Receiving and Paying for Goods • Check quantity received against delivery note asap • Report discrepancies to supplier and confirm in writing • Delivery note is key component of contract documentation – retain with other paperwork • Match invoice against delivery note • Orders - obtain credit notes where appropriate and only process invoice when received Qfis POP

41. Purchasing for the UniversityMethods of Purchase Paying personally for goods and services • Personal payment by staff or students is not permitted - must be purchased using official order or purchasing card • Exceptional circumstances only (eg, urgent requirement when travelling abroad – must be made clear on Expenses Claim) • Purchasing approves all such claims • Claim may not be approved if inadequate justification is provided Qfis POP

42. Purchasing for the UniversityMethods of Purchase Purchasing Cards • Purpose - purchase of low value goods and services (mainly on-line) • Single transaction limit of £500 + VAT (rounded to £600) on all purchasing cards – individual card limits reviewed annually with some limits increased based on spend profile • Cards have various monthly limits set in agreement with Cardholder’s Head/Director Purchasing Cards

43. Purchasing for the UniversityMethods of Purchase • Only cardholders should undertake purchases • Security = no card numbers on faxes or e-mails • On-line ordering – ensure that cardholder uses only sites with secure payment methods • Efficiency savings = use of purchasing card encouraged where possible • Better for suppliers as payment received within four days (improved cashflow outweighs merchant fee charged by supplier’s bank) Purchasing Cards

44. Purchasing for the UniversityMethods of Purchase To facilitate monitoring of ‘personal expenses’ by Payments Office (invoice/staff expenses form), these categories are blocked on all cards:- • Catering and catering services • Leisure activities • Restaurants and bars • Personal services • Professional services Purchasing Cards

45. Purchasing for the UniversityMethods of Purchase Summary of Purchasing Reports: • Confirmation Order Reports – issued to Heads/Directors and Nominated Buyers (on request) • Purchasing Practices: Exception Reports – issued to Heads/Directors and School Managers (details purchase order transactions where best practice wasn’t followed) • Purchasing Card: Maverick Spend reports – issued to cardholders (highlights areas of non-contract spend and requests justifications/further information from cardholder)

46. Accounting for VAT on Purchase Orders

47. Purchasing for the UniversityAccounting for VAT on Purchase Orders Most goods and services purchased by the University will incur VAT at 17.5%. Exceptions:- • Goods/services exempt from VAT • Supplier not VAT registered • Goods which are VAT zero-rated or eligible for VAT zero-rating, by declaration • Services being provided outside the UK (which in itself has exclusions)

48. Purchasing for the UniversityAccounting for VAT on Purchase Orders The following applies where VAT is payable:- • UK Suppliers – VAT shown on invoice • EU and Rest of World Suppliers – VAT not shown on invoice*. Instead we make payment directly to HMRC at the UK rate. * (unless the charge is for a service which takes place in the country of supply – eg VAT on a hotel room in Europe where the invoice will show the gross total cost (eg £121 in Belgium where the VAT rate is 21%, ie, £100 cost + £21 = £121). Some services, including consultancy, are exempt from this rule – contact Finance Tax Section for further details.)

49. Purchasing for the UniversityAccounting for VAT on Purchase Orders VAT Coding of Orders to UK Suppliers:- S – UK Standard rate Z – Zero-rated – where either the applicable rate is 0% or zero-rating of VAT can be claimed eg for medical research X – Exempt – VAT does not apply W – Supplier not VAT-registered or VAT cannot be extracted from purchase price

50. Purchasing for the UniversityAccounting for VAT on Purchase Orders VAT Coding of Orders to EU Suppliers (EU Imports):- ES – UK Standard rate payable to UK Customs & Excise EZ – Zero-rated – where either the applicable rate is 0% or zero-rating of VAT can be claimed eg for medical research EX – Exempt – VAT does not apply EW – VAT cannot be extracted from purchase price or not applicable to any of above categories