The continued provisions of government programs and services relies to a great extent upon the government’s ability to procure the goods and services that it needs to deliver those services economically, effectively and efficiently. Although the number of buyers will not increase in the average municipality overnight, steps can be taken at least to simplify the work of those who must carry the load.
To maximize the effectiveness of the procurement process, municipalities need to:
- Introduce a process for the standardization and rationalization of the procurement process among themselves. Every municipality has its own unique rules that differ from all others. There is little benefit in continually re-inventing the wheel. If nothing else, trying to do so makes it harder for suppliers to understand governments as customers;
- Enhance internal processes to achieve reductions in the cost of ordering and invoicing;
- Secure lower prices from suppliers, whether through enhanced competition, better aggregation or (as in the private sector) through the development of supportive arrangements;
- Improve procurement planning and reduce “emergency” and similar chasing (which is often carried on a no-competition basis);
- Enhance inventory management to optimize stock levels, improve the monitoring of stock levels to identify emerging needs, and reduce shrinkage; and
- Improve the efficiency of usage of consumables by adopting best practices of usage, including monitoring and benchmarking consumption and the pooling of equipment within and across departments.
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 its importance 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 $200- and $400 million in goods and services per year.
In contrast, in the private sector industries, a firm with an annual procurement of $150 million or less would likely have 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 tender 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 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, repeated almost weekly in 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.
Stephen Bauld is a government procurement expert and can be reached at email@example.com.
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.