6.0 Making Purchases

Goals

Restrictions

General

Advance Payments

Agreement on Internal Trade (AIT)

Airfare

Airfare Purchases via Internet

Asset Purchases

Automatic or Recurring Debit Arrangements

Freedom of Information and Protection of Privacy Act (FOIPPA)

Internet Purchases

Legally Encumbered Suppliers

Other Government Charge Cards and Accounts

Phone Purchases

Purchasing in Foreign Funds Corporate Supply Arrangments/Standing Offers

Surcharges for Using the Purchasing Card Withholding Tax on Payments to Non-residents Purchasing Card Decision Guide

Authority to Make the Purchase

Type of Purchase

Purchasing Method


6.0 Making Purchases

The Procurement Governance Office in the Office of the Comptroller General has overall responsibility for purchasing policies in government. Using the purchasing card does not replace the reliance on sound procurement practices. Procurement policy regarding purchasing in the public sector is contained in the Core Policy and Procedures Manual (CPPM) manual, chapter 6.

In addition to adhering to policies in CPPM chapter 6, and chapter 4.3.19, cardholders are also responsible for following the procedures contained in this manual. Ministries are authorized to place further restrictions on the use of the purchasing card.

A Decision Guide is provided at the end of this chapter which brings all of these policies and procedures together. It is suggested that the cardholder review the Decision Guide after reading this chapter and refer to it when uncertain how to use the purchasing card in a particular situation.

Cardholders who are still uncertain how to proceed in a specific situation or who need more information about the purchasing card can contact their purchasing card coordinator.

Goals

The goals of purchasing policy are to:

  • ensure the best value for the public’s purchasing dollar;
  • ensure all purchasing activities are undertaken in a visibly fair, ethical and prudent manner;
  • promote BC economic development by creating access to sales opportunities for BC suppliers;
  • ensure equitable trade practices with other jurisdictions; and
  • ensure all vendor concerns are dealt with in a timely, fair and equitable manner.

Restrictions

The purchasing card is not to be used by anyone other than the person whose name appears on the card.

Purchasing cards will be used to make government purchases of up to the maximum approved transaction limit and monthly limit subject to purchasing policy.

The purchasing card has been blocked from use with certain merchants. The Merchant Category Code Blocking has been set government-wide; however, ministries may add or delete merchants to create a ministry Merchant Category Code Blocking table. Where ministries have changed the default blocking, they are to provide a list to their cardholders and the Financial Management Branch (Office of the Comptroller General).

For purchases in excess of $1000, at least three competitive quotations should be obtained before making the purchase. Documentation of quotations must be kept on file in the branch for audit and Freedom of Information purposes. (See the section later in this chapter on the Freedom of Information and Protection of Privacy Act.)

If a total purchase price (including tax and delivery) exceeds a cardholder's transaction limit, it is not acceptable to split a purchase into multiple transactions.

The purchasing card must not be used:

  • if the purchase exceeds the cardholder's per transaction or monthly limit (this information is recorded on the Request for Card/Card Detail Change form and is available from the purchasing card coordinator);
  • to purchase goods and services from Merchant Category Code blocked suppliers.
  • to purchase any goods or services presently made with the Motor Vehicle Charge Card;
  • for repairs to general fleet plan vehicles (Classes A to P);
  • for individual travel related expenses such as hotel accommodation, car rentals and meals where the employee would normally be reimbursed through a claim processed on a travel voucher (note that the purchasing card can be used for travel expenses normally directly booked and paid by the ministry or organization, such as convention expenses and assured loading passes);
  • to obtain cash advances, even if related to government business;
  • for training that is a taxable benefit to the employee;
  • to pay for intra-governmental purchases that are made by manual or electronic accounting transfers;
  • for printing including copying, duplicating, typesetting and supplies, unless prior authorization is obtained from Queen's Printer; and
  • with suppliers known to be legally encumbered (e.g., garnishing orders, third party demand notes, etc. filed against them).

General

When using the purchasing card to purchase goods or services, the following procedures are to be followed:

  • obtain pre-authorization from the expense authority whose budget will be charged with the purchase. It is preferable that this authorization be in written form (email is acceptable) where possible;
  • utilize local vendors whenever possible;
  • obtain three competitive quotes for purchases in excess of $1,000, if possible; and
  • keep a record of all paperwork, such as receipts, packing slips and correspondence.

Use of the purchasing card does not, in itself, create a contract between the buyer and seller. It is merely an instrument to make a payment. Where a contract is in place and the supplier is willing to accept payment by the purchasing card the following types of payments can be made:

  • systems development/maintenance/enhancements (i.e., professional or general service contracts for LAN maintenance , custom software development, enhancements or related items);
  • professional service contracts;
  • data processing related services;
  • rental renewals;
  • vehicle rentals for operational purposes exceeding 30 calendar days;
  • photocopying equipment (contact SSBC first); annual repair and maintenance contracts.

Advance Payments

Payments may not be made in advance of receipt of goods or services except where:

  • the payment date is set by contract;
  • the contracted price is based on payment within a specified time;
  • industry practice is to accept advance payments only (such as subscription fees for periodicals and course registration fees); or
  • an early payment discount is available.

Agreement on Internal Trade (AIT)

The Agreement on Internal Trade (AIT) is an agreement between the provinces and the federal government intended to provide businesses across Canada with equal access to procurement opportunities with government.

The provincial and federal governments are required to report purchases of goods and services and construction. Reports include most government purchases although some types of services and products are exempt. For further information, see CPPM chapter 6 or contact the Procurement Governance Office.

Airfare

Airfare (bus and train tickets) can be purchased with the purchasing card. The traveller should check with the airline to see if they will be required to produce the purchasing card at the airport for boarding. In these cases the cardholder name on the purchasing card should be the same as the traveller's name.

Airfare Purchases Via Internet

In some cases, the most economical airfare is only available via an airline's internet site. If the web-based fare is less than the best fare available through a travel agent, including their service fee, it is acceptable to acquire the web-based fare.

Asset Purchases

Purchases made to acquire fixed assets are coded to fixed asset STOBs. Policy on fixed assets can be found in CPPM chapter 8.

Automatic or Recurring Debit Arrangements

Automatic or recurring debit arrangements enable vendors, with the prior consent of the cardholder, to charge payments to a specified card number at regular intervals without obtaining the cardholder's signature each time. Once established, these arrangements are valid until cancelled in writing.

Cardholders entering into automatic or recurring debit arrangements must ensure that:

  • the risk of making duplicate payments is minimized (e.g., by ensuring that accounts staff are aware that invoices from the company receiving the automatic payment should never be processed through accounts payable); and
  • the automatic debit arrangement is documented and known to the cardholder's backup, supervisor, or purchasing card coordinator as appropriate or as directed by ministry policy. Documentation should identify the details and terms of the arrangement and a contact name.

Freedom of Information (FOI) and Protection of Privacy Act

The primary purpose of the Freedom of Information and Protection of Privacy Act is to make public bodies more accountable to the public and to protect personal privacy. Follow ministry or agency procedures or contact your FOI representative for information and instructions before releasing information to outside parties.

Internet Purchases

Purchases may be made over the Internet using the purchasing card for payment.

If you cannot comply with the following, you must not buy over the internet. Non-compliance with policy is a misuse of the purchasing card.

All purchasing policies apply to internet purchases. These include, but are not limited to, provisions for the use of Standing Offers and obtaining competitive quotes.

Before making a purchase over the internet, you must:

  1. Deal with known merchants.

    Only use well known/well established vendors. Review the vendor's website and read their guarantees, warranties and return policies prior to making a purchase. The Better Business Bureau online and other consumer agencies may have information about specific merchants. Also, you may look for the Canadian Institute of Chartered Accountants' sponsored "WebTrust" certification.

    Use only secure sites and browsers. To determine if a merchant site is secure, look for:
    • an unbroken lock or key symbol, an URL that begins with https://, or
    • the words Secure Sockets Layer (SSL).

    Browsers that are acceptable for purchasing card transactions are version 4.0 (or later) of Microsoft Internet Explorer or version 4 (or later) of Netscape Navigator. These browsers use SSL technology that allow your browser to automatically encrypt data before sending it via the Internet. A Web site is secure when an unbroken key (as in Netscape) or a lock (as in Microsoft Internet Explorer) appears in your browser window. In addition, some merchants may require an account to be created that uses a password for order entry. This is a secure method as long as the password is not shared. Passwords created for these accounts should not be based on personal references (e.g., birth dates, phone number, family names or social insurance number) as they can be easily guessed.

    SET Secure Electronic Transaction TM, is another acceptable technology designed specifically for online payment security. In addition to encrypting payment information, it also uses digital certificates to verify that purchasers and vendors are both authorized to use and accept credit cards.

    Never send your purchasing card number via email. Information that travels over the Internet as regular electronic mail is not fully protected from being read by outside parties. All reputable merchant sites use encryption methods that will protect your private data from being read by others as you make an online transaction.

    Read delivery and return policies and privacy statements. Read the merchant's privacy policy and explanation of how your information will be protected. Consider if the vendor stores the credit card number in their database and how they protect it after the purchase has been conducted. Does the privacy statement indicate that purchasing profiles and other data will not be sold. Before you buy, make sure you can return any unsatisfactory items and get a refund. Sales policies should cover the delivery methods and cost of delivery, currency, taxes applied, return and refund policy, and a contact number or email address.

    Keep a record of the transaction. Enter the record of the transaction on the transaction log. Back up the transaction by saving and printing the online confirmation of your order. Ensure that the web site (URL) is identified. Attach the printed online confirmation to your transaction log and statement. You may wish to print a copy of the vendor's delivery, return and privacy statements for future reference. See Chapter 7 of the of this manual for policy regarding recording of transactions.

    Review and reconcile your transactions routinely, so that any fraud is identified as early as possible. There have been instances where a vendor's database of stored credit card numbers has been accessed through the Internet. Thus, it is imperative that cardholders review and reconcile transactions as soon as possible. See Chapter 9 of this manual regarding disputed items.

  2. Your purchasing card is for government purchases only; you must not provide your purchasing card details to a web site for any other purpose (e.g., surveys or other instances where you are not making a purchase).

Legally Encumbered Suppliers

Cardholders may not make payments to suppliers they know have legal encumbrances (garnishing orders, third party demand notices, etc.) filed against them. Payments to legally encumbered suppliers must be passed through the Legal Encumbrance Branch so that payments can be diverted, as appropriate. For further information, refer to CPPM E.1.

Other Government Charge Cards and Accounts

The purchasing card must not be used to purchase goods and services that other government charge cards or payment programs are used for, such as:

  • purchases normally processed using the Vehicle Management Charge card; and
  • payment for travel-related expenses normally associated with the travel card unless authority has already been given to bill the government directly (convention expenses, assured loading tickets).

Phone Purchases

Government policy allows cardholders to arrange purchases by phone. Purchases should be made using secure telephones, not non-secure ones such as cellular or portable phones

On all phone orders, cardholders must ensure that they record a description of the item(s) ordered, quantity, date of order, supplier, and total dollar value of the purchase.

Purchasing in Foreign Funds

The purchasing card is a convenient method of purchasing in foreign funds. Cardholders may place orders by mail or over the phone. When the charge is put through, the total is converted into Canadian dollars by the bank.

When purchasing goods in foreign funds, cardholders should obtain the current exchange rate to estimate the total cost in Canadian funds. Exchange rates are readily available from any financial institution.

Cardholders must estimate the conversion of quoted prices to Canadian dollars when obtaining expense authority approval to avoid exceeding either the expense authority or cardholder limits. The amount appearing on the purchasing card statement is based on the exchange rate at the time the transaction is processed by the bank and may differ slightly from the estimated converted value.

Corporate Supply Arrangements/Standing Offers

Shared Services BC (SSBC) and ministries have negotiated agreements (Corporate Supply Arrangements CSA, Standing Offers SO) with various vendors to supply a range of goods and services to the government. Terms such as price, quantity, time frame, warranty coverage and delivery are pre-negotiated, so cardholders taking advantage of these purchasing agreements can be assured that the comparison shopping has been done and that pricing and other terms stated represent best value for the province. Therefore, no comparison quotes need be obtained.

Either a purchasing card or a Purchase Order on a Standing Offer (POSO, PC199 Ordering PC199 Ordering #DCV 4064 from Queen's Printer) can be used to purchase items from a Standing Offer or a Corporate Supply Arrangement. Cardholders should consult with the vendor to ensure that the purchasing card is accepted, as some Corporate Supply Arrangement contract terms do not stipulate the purchasing card as a payment method.

Surcharges for Using the Purchasing Card

MasterCard International does not permit its merchants to assess a surcharge for accepting MasterCard. Purchasing card coordinators should contact the Bank of Montreal's Service Representative (see chapter 9 for contact numbers) as soon as possible with the vendor name and address, cardholder name and number and proof of charge when surcharges are assessed.

Withholding Tax on Payments to Non-residents

Revenue Canada requires that an income tax withholding of 15% be taken from all payments of fees, commissions or other amounts paid to non-resident individuals, partnerships or corporations in respect of services rendered in Canada. Where the withholding of tax is required, do not make a payment using the purchasing card unless tax can be deducted from the payment before being processed by the bank. For further information regarding withholding tax on payments to non-residents, refer to the Canada Revenue Agency's Guide on Withholding Tax.

Purchasing Card Decision Guide

Cardholders may use the questions below to guide their decisions to use the purchasing card for a particular transaction and to determine some of the procedures to be followed if the purchasing card is indicated.

Authority to Make the Purchase Have you obtained expense authority approval to initiate an expenditure?

      Y

      Proceed to next question.

      N

      Obtain approval, according to ministry-specific procedures.

Is the item within your transaction limit?

      Y

      Proceed to next question.

      N

      Do not use the purchasing card.

Would making this transaction allow you to remain within your monthly dollar limit?

      Y

      Proceed to next question.

      N

      Do not use the purchasing card. If this is a recurring situation, contact your expense authority and purchasing card coordinator to discuss your limit.

Is the item in a Merchant Category Code you are restricted from using?

      Y

      Do not make the purchase. If the nature of the purchases you are asked to make is changing, contact your expense authority and purchasing card coordinator.

      N

      Proceed to next question.

Type of Purchase Is it an authorized government purchase?

      Y

      Proceed to next question.

      N

      Do not make the purchase

Is the item subject to any ministry-imposed restrictions?

      Y

      Follow ministry-specific procedures.

      N

      Proceed to next question.

Is the item subject to any restrictions? (Refer to the section on Restrictions in this manual.)

      Y

      Do not make the purchase.

      N

      Proceed to next question.

Is the transaction for a business meeting expense?

      Y

      Has your senior financial officer given prior authorization for direct billing?

       

      Y

      Obtain pre-approval on a Business Meeting Expense Approval form.
       

      N

      Do not use the purchasing card.

      N

      Proceed to next question.

Purchasing Method Have you obtained at least three competitive quotes if the cost is over $1,000?

      Y

      Proceed to next question.

      N

      Obtain three competitive quotes from suppliers and keep this information on file.

Is it more convenient to place the order over the phone?

      Y

      Place the order over the phone and follow-up with a faxed confirmation letter if the supplier requests it.

      N

      Go to merchant’s premises to conduct the transaction.

Is the item available on a Standing Offer or Corporate Supply Arrangement?

      Y

      Does the vendor accept the purchasing card?

       

      Y

      Complete the transaction.
       

      N

      Complete a Purchase Order on a Standing Offer, if you are authorized to do so, and do not use the purchasing card.

      N

      Use one-time purchase procedures to a select supplier.