Purchasing and Bidding: Purchasing Procedures, Policies, and Manuals
Contents
Need for Written Procedures and Policies
Statutes governing purchasing and bidding in Washington cities and towns are relatively short, but are confusing and seem complex. Common sense, prudence and staff turnover call for written policies and procedures, gathered into a purchasing manual that is accessible to all agency personnel and required reading for anyone who makes purchases on behalf of the agency.
Municipal Purchasing
- Following are excerpts from Chapters 1-3 of Municipal Purchasing: 1996 Edition, published by the Colorado Municipal League.
Chapter 1: History of Purchasing
"Purchasing is a term used to denote the process of procuring materials, supplies, equipment, and services. In a narrow sense, the word "purchasing" simply describes the act of exchanging money or its equivalent for goods. In a broader sense, however, the term "purchasing" implies a systematic approach to the process of buying required goods and services in proper quantities and qualities, from the right sources at the right times, and at fair prices. The term also implies the ability to provide adequate storage, distribution to all locations within the municipality, and surplus programs."
"The primary difference between private and public purchasing is that dollars expended by government are generally acquired through taxation. Initially this distinction may seem to have little import; in actuality it sets the climate for public procurement. The use of tax dollars propels most government buying into the public and sometimes political arena. Coupled with the moral obligation to maximize the use of citizens' tax dollars. Governmental purchasing must take place within a prescribed framework of law designed to protect the public interest. While their non-governmental counterparts may choose whether to reveal prices paid, or the reasons behind the selection of a particular vendor, governmental entities usually have no such choice. Government bids, purchase orders or contracts, and other purchasing documents are public records."
Chapter 2: Objectives of Purchasing
"Public procurement must be conducted with skill and professional ethics. In order to accomplish economical and efficient public procurement, a governmental purchasing program ideally should have three primary objectives:
- to procure within the limits imposed by law and in accordance with adopted policies and procedures, the best value in goods and services necessary to the performance of operations;
- to provide a channel through which governmental expenditures may be monitored; and
- to serve as an information resource for other government operations.
- To obtain required goods, services, or equipment at the best price. Promotion of effective competition in public purchasing by open and fair competitive bidding, bulk purchasing and quantity discounts, and standardization of common items are elements of good purchasing practice.
- To procure the materials, supplies, and equipment best suited to accomplish the job of the using department. Purchasing agents must understand the job to be done and the characteristics of the materials and equipment that are possible choices for use in particular operations. In this way, the type, size, quantity, and quality of equipment and materials will fit the operational performance needs.
- To procure the right number of units or quantities required, and to avoid overbuying and underbuying. Requirements need to be judged closely and scheduled so that surplus stocks and shortages are minimized.
- To obtain necessary technical services. Technical services are sometimes an integral part of the product, such as assembly or installation, training of operators, initial and periodic servicing, and warranty work.
- To ensure that goods and equipment are in the hands of the using departments when and where they need them.
- To identify sources of materials in order to assure availability. This means avoiding sole-supplier situations, testing for effective substitutes, and maintaining good relationships with reliable and effective vendors.
- To dispose of unneeded inventory. By careful identification of items no longer needed, arrangements may be made for disposition of surplus through trade-ins, salvage, transfer to another department, or sale."
Chapter 3: Structure for Municipal Purchasing "These objectives imply a certain degree of control, and control in purchasing begins with the internal structure of the procurement function. The internal purchasing structure in municipalities takes many forms depending upon applicable legal requirements and established policies. Basically, however, a city's or town's purchasing structure falls into one of two categories - decentralized purchasing or centralized purchasing.
Decentralized Purchasing
Decentralized purchasing, sometimes referred to as departmental purchasing, exists when municipal departments buy goods or services, or perform other procurement functions independently of one another. Generally, there is no overall coordination in decentralized purchasing. The responsibility for decentralized purchasing normally rests with department managers or key staff. It is generally conceded that completely decentralized purchasing does little to save a municipality money.
Centralized Purchasing
The goal of centralized purchasing is to gain control over the entire procurement process, thereby allowing municipalities to purchase in the most efficient and economical manner. The responsibility for buying goods and services is vested in one municipal official or department.
"The term 'centralized purchasing' implies more than the acquisition of goods and services at an acceptable price. It includes the functions of preparing specifications, screening vendors, conducting purchasing negotiations, awarding purchase orders and contracts, and assuring delivery of goods. Further, centralized purchasing may encompass the related functions of procurement such as receiving and inspecting incoming goods, inventory control, storing, and disposing of surplus and outmoded articles."
"The best purchasing system may be a combination of these methods. Many municipalities use a combination depending on specific needs. One combination of a decentralized and centralized purchasing is to leave the purchasing responsibility with each department, provided there is one centralized procurement policy by which all departments must operate. Another variation is to delegate authority for certain low dollar levels of purchases, assuming that consolidation of the $250, $500, or $1,000 purchases isn't possible. Each city and town should assess its own procurement needs and requirements to develop a procurement system best suited to its own circumstances."
- Following are excerpts from Public Purchasing: A Checklist for the Local Government Manager, ICMA, 1998, by Donald Harney, then Purchasing Agent, Arlington City/County, Virginia
Regulations
"Too often, local government purchasing ordinances or regulations become outdated, no longer reflecting current procurement environment and trends. For example, although local governments have used competitive negotiation for the purchase of general goods and services for years, many purchasing regulations still do not permit the use of this procedure except for soliciting professional or technical services. Bidding limits for small purchases and the dollar limit at which purchase awards require council or board approval may not have been raised in years to reflect inflation.
Procurement regulations should be reviewed and updated every year or two to reflect current trends or changes to laws. If your state government or a neighboring local government amends its laws governing purchasing, you should review the changes and use them as a model and justification to upgrade your local regulations. The next time your legal department tell you that a procedure you want to use is not authorized under local law but is authorized under state law, ask how yours can be amended to track the state law. You may be surprised at the support you receive from the elected officials when you're trying to modernize archaic procurement laws."
Manager's Review
[Note: Manager as used here could also be a department head, mayor, council, commission, etc.]
"The manager's review of a proposed award of a contract is usually the last step before the process is opened to public scrutiny. When approving an award or presenting the decision to award to elected officials, the manager relies on a report countersigned by the head of the department using the goods or services. This report should summarize the key elements of the solicitation and contain information that both describes the bid process and anticipates questions that may be raised by the manager, elected officials, or even the media. Sample entries could include:
- Background of the purchase and how it supports a specific municipal program or programs
- Unusual circumstances of the purchase (e.g., sole source or intentionally restrictive specifications), an explanation and justification of the actions taken to address them, and any indication that adverse comments or protests of the award recommendation can be expected
- Total number of bidders notified, the names and locations of bidders responding, and the prices bid by each
- Reason(s) for rejecting any bidder(s) and an explanation of the reason(s)
- The funding source (e.g., bond funds, general funds, capital improvements plan)
- Budget comparison including the original estimate and reasons why the purchase came in over or under budget
- Identification of staff preparing the report"
Purchasing Manuals
- Following is an another excerpt from Public Purchasing: A Checklist for the Local Government Manager, ICMA, 1998, by Donald Harney, Purchasing Agent, Arlington City/County, Virginia.
Creating a Purchasing Manual
"An essential document in any local government is a purchasing manual containing the policies governing the "how to" of public procurement. The manual can contain a variety of topics, from basic instructions on how to prepare a purchase order to the procedures used to take telephone quotations, submit a sole source justification, make an emergency purchase, or negotiate a contract. A manual makes it easier to enforce purchasing policy.
If your local government does not have a purchasing manual of its own, obtain a copy of the manual of each local government in your area and most of your work is done for you. Don't hesitate to copy parts of someone else's manual; because all local governments are subject to the same public procurement guidelines, most purchasing manuals contain elements copied from another local government..."
Partial Contents of Arlington County Purchasing Manual
Source: Arlington County, Virginia, Purchasing Manual, 1996
Purchasing In Arlington County
Principles of Purchasing
Responsibilities of the Purchasing Agent
Purchasing Policy
Agency Responsibilities
Business Relations with Suppliers
Unauthorized Purchases
Preparing Purchase Orders
Blanket Purchase Orders
The Purchase Order Return Form
Purchase Order Changes
Cancellation of Purchase Orders
Areas Exempt from Competitive Bidding
Follow-up and Expediting
Telephone Quotation Procedures
Telephone Quotation Procedure for Rental Items
Informal Bidding Process
Formal Bidding Process
Specifications
The Contract and It's Use
Establishing New Contracts
How to Use State Contracts
Personal Service Agreement
Sole Source Procurement
Emergency Purchases
Disposal of Surplus Material
The Payment Process
The Receiving Process
Procuring Professional and Consultant Services
Appendices
- Dictionary of Purchasing and Shipping Terms
- The Purchasing Resolution
- Minority Business Policy
- Proposal Evaluation Guidelines
- Contract Insurance
- Negotiating Contract
Contents of the City of Yakima Purchasing Manual (
422 Kb)
PURCHASING PROCEDURE MANUAL TABLE OF CONTENTS
MISSION STATEMENT
PURCHASING CODE OF ETHICS
I. HOW TO PURCHASE
A. Federal Funding
B. Disadvantaged and Minority Vendors
C. Certificates of Insurance and Prevailing Wages
1. Certificates of Insurance
2. Prevailing Wages
a. The Law
b. Purpose
c. Defined
D. When to Involve Purchasing
E. Exceptions
1. Controlled Commodities
2. Intergovernmental Purchasing
3. Professional and Personal Service Contracts
4. Architectural and Engineering Services
5. Blanket Purchase Orders
F. Dollar Limits
1. Less Than $2,500
2. $2,500 to $9,999 - Informal Price Quotes
a. Procedure if Division Obtains Quotes
b. Procedure if Purchasing Obtains Quotes
3. $10,000 to $24,999 - Written (Formal) Quotes
a. Procedure
4. Greater than $25,000 - Sealed Bid
a. Division's Duties in Bidding Process
b. Purchasing's Duties in Bidding Process
G. Freight
1. Shipping Terms
2. Receiving Freight
a. Get what you sign for
3. Damaged Cartons
a. Visible Damage
b. Concealed Damage
H. Urgent and Emergency Purchases - $2,500 to $24,999
I. Emergency Purchases over $25,000
J. Waiver of Bid/Quote Requirements
K. Sole Source Purchases
L. Sole Source or Waiver - over $25,000
M. Blanket Purchase Orders
N. Contract Purchases
O. Capitol Outlay - Fixed Assets
P. Personal Service Contracts
Q. Professional Service Contracts
R. Equipment Leases
1. Leasing Equipment under $25,000
2. Leasing Equipment over $25,000
II. DISPOSAL OF SURPLUS PROPERTY
III. AIMMS PROCEDURES
A. How to determine type of requisitions
1. Stock Requisitions
2. Direct Requisitions
3. Service Requisitions
B. How to enter a requisition
C. Determining Buyer Number.
D. P.O. Header Description
E. Printing P.O.'s
F. Blanket P.O.'s
G. Receiving
1. Dock Receipts
2. Service P.O. Approval Entry
H. Payments
DEFINITIONS
TELEPHONE QUOTE FORM
Return to Purchasing and Bidding Contents
Return to "Bid or not to Bid" Contents