Improving the purchasing function.

• Author: Cole, Stephen

Careful attention to bid specifications, sound processes, and new technologies can bring greater efficiency to purchasing in small or large governments.

Throughout the country, governmental entities have been rightsizing all levels of their operations in an effort to control operating expenses while still providing increasing levels of services as demanded by their citizens. To accomplish this goal without tax increases, public employees are being assigned additional responsibilities, usually without additional supporting staff.

In the area of purchasing, this trend is evident through a growing number of purchases, development of bid specifications, management of prebid conferences, meetings with vendors and contractors, and contract awards and management, as well as increasing research required to select the best, most cost-effective product or service. If purchasing is to continue providing what is needed when it is needed without wasting taxpayer dollars, then efficiency is the key means to accomplishing these goals. The following discussion of techniques should be helpful in providing the level of service expected by both the entity's citizens and various user departments.

Bidders/Vendors Lists

Since public-entity purchases involve the expenditures of someone else's money (the taxpayers') to obtain goods and services that will be used by still others (public officials and employees that deliver governmental services), there is an obligation to allow members of the private sector equal access to bid on the purchases made by the entity. Maintaining a computerized list of potential vendors/contractors (bidders) is one method of keeping track of those firms that have expressed a desire to conduct business with the entity. Also, when the entity develops a need for a particular good or service, the list can be used as a resource.

Some entities have developed elaborate formalized procedures for bidders to be placed on the list. The bidder may be required to complete and submit an application. Then, after the bidder is added to the list, a confirmation notice is returned. The bidder's goods or services are keyed into the computer by product or service code so that they can be retrieved easily. Some larger entities even charge a fee to cover the administrative costs of adding the bidder to the list. Smaller entities can obtain sufficient information by asking the vendor to forward a short memo explaining the goods and services it can provide, who to contact, mailing address, and fax and telephone numbers.

Like most lists, the vendor list soon becomes useless if it is not updated periodically. Updating can be accomplished by simply eliminating all bidders at the end of the fiscal year and then relying on each bidder to reapply; however, this can be a costly and time-consuming method. An alternate method is to delete a bidder if specifications are mailed to the bidder but there is no response. With this method, some bidders may not realize that if they do not respond, they will be removed from the list (and the entity may lose a good resource). One method that works well with a minimum of cost and time is mailing a flier to each bidder on the list every other year asking the bidder for updated product/service information and verification of the mailing and contact information. The flier includes a statement notifying the bidder that failure to respond will result in their firm being removed from the list. For those who do respond, the new information is keyed for future use.

Annual Purchasing Agreements

Annual purchasing agreements, often referred to as blanket purchase agreements, are agreements established with suppliers to allow small purchases by the entity throughout the year without going through the normal purchasing procedure each time a purchase is made. Price agreements increase the efficiency of the entity by 1) allowing rapid response when a commodity is required and 2) reducing administrative costs by eliminating the need to obtain several quotes for each purchase.

To establish an annual purchasing agreement, the user department of the entity must determine the approximate quantity needed and estimated amount that will be spent during the fiscal year for a particular category of product. Typical products that are good candidates for annual purchase agreements are office supplies, fuel for vehicles, building and vehicle maintenance supplies, employee uniforms, street repair materials, and janitorial supplies.

If the entity's estimated total annual expenditure for any one of these categories exceeds its dollar threshold for seeking sealed bids/proposals, then an annual purchase agreement could be established (a state's sequential, component, and separate purchasing laws may require such an agreement). If many single purchases will be made throughout the year, the entity may choose to establish an agreement for convenience, even though total expenditures may not reach the threshold for sealed bids.

A purchasing agreement can be drafted as a multivendor agreement. This type of contract states that, when placing an order, the entity will contact the primary successful bidder first (usually the lowest responsible bidder); however, should the primary bidder not be able to fill the order, the entity has the option to move on to the next lowest bidder or secondary vendor, and so on through the list of bidders. The bid specifications need to explain that the award will be multivendor, and it is helpful to ask bidders to indicate in their response whether or not they want to be considered as a secondary vendor should they not be selected as the primary. Because it might require that they maintain stock of certain products, some vendors may not want to be considered a secondary vendor but only the primary vendor.

Maintenance/Labor Agreements

Similar in nature to the annual purchase agreement are the annual maintenance and/or labor agreements. Whenever the entity has a need to contract for services or projects that are labor intensive, annual contracts, like purchasing agreements, can be used to increase efficiency. Many of the same techniques and rules that are used in determining the need and selecting the successful bidder for purchasing agreements apply to annual contracts. This type of annual agreement is often used for janitorial services, equipment maintenance, mowing for private property not maintained by its owners, electrical and plumbing repairs or modifications, and more complicated annual...