As a general observation, not only do municipalities fail to appreciate how a more efficient approach to purchasing could improve their bottom line, they consistently undermine the importance of purchasing as a critical part of overall municipal operations.
Across Canada, municipal purchasing departments at mid-sized cities consist of four to six buyers, who are responsible for purchasing between $300 and $500 million in goods and services per year. In contrast, in some private sector industries, a firm with an annual procurement of $150 million or less likely will have a purchasing staff twice the size.
Yet, a buyer at a municipality is likely to be engaged in a wider range of purchasing activity than any person in an equivalent position at a private sector corporation of comparable size, for the simple reason that the activities of a municipality are so diverse. Although municipalities carry on a much wider range of activities than 10 years ago, many are still running with the same sized purchasing department.
Moreover, they have not trained their staff to handle these new areas of concern. Municipal purchasing departments have remained small, despite the growth in tender-related litigation. One or two claims a year — even if settled before going to court — stretch the purchasing staff even further. There is also the growing problem of retirement and the loss of institutional memory.
The parsimony of most municipalities in recruiting, payment to procurement staff, and giving proper training reflects three major influences. The first is the dire position in which many municipalities are currently situated. Obviously, if the municipality has no money to pay more, it cannot pay more. The second is the widespread (although untrue) public perception, related almost weekly in the newspapers across the country, that municipal staff are underworked and overpaid.
While this view is mistaken, the views are expressed sufficiently widely that it cannot be ignored — for it colours any discussion of the subject of municipal financing. Whatever the case may be in other parts of municipal administration, this is certainly not true with respect to the municipal purchasing staff. Across the country, municipalities serve as the purchasing training ground for other levels of government and for the private sector. Municipal buyers are overwhelmingly young (which translates to inexperienced). As they advance in their careers, they migrate to other employers. They do this because the public sector pay is low, its benefits poor, its opportunities for advancement limited, and in some cases, the quality of life substandard.
The third factor is the approach adopted by municipal human resource towards the determination of appropriate salary scales. The invariable practice among municipalities is to compare themselves to other municipalities. This is obviously not a suitable approach where municipalities are bleeding out their talented purchasing staff to other levels of government and private sector.
Since they are major players in their local markets, delivering a wide range of programs and services, municipalities need top notch procurement departments. However, with a human resource approach characterized by such features, they are most unlikely to get one and even less likely to retain it. Complicating matters further is the fact that, due to tight funding, municipalities have lost much of their high-level expertise, preferring instead to contract out for consulting services.
This has watered down the ability of municipalities to manage their more complex procurement projects. Construction affords an obvious example of areas in which critical expertise is lost. At one time municipalities also had large engineering departments and in-house architects. Such professionals are now largely gone. When a large construction project comes along, there is no in-house staff to devote to the project. The only option is to use expensive consultants.
Unfortunately, the purchasing staff defending adherence to the rules are not even present when critical decisions are made to override them.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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