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Procurement Perspectives: Decentralized procurement has deep roots

Stephen Bauld
Procurement Perspectives: Decentralized procurement has deep roots

In Canada, some support for a decentralized approach to procurement can be found in the work of the 1963 Royal Commission on Government Organization (the Glassco Commission), which served as a prelude to modern approaches to the management of government business.

Although this was a study of the federal government, it made several telling observations about the organization and conduct of government in general. The mail observation made by the Glassco Commission was that the government and its administration were not structured to properly fulfil their mission. Central agencies had neither the power or the skills necessary to elaborate and implement comprehensive policies.

Moreover, the Treasury Board and related central public services management were found to have intervened excessively in the day-to-day operations of government departments, thus preventing them from managing their own affairs and being accountable for their management. The Commission recommended extensive decentralization: the byword of the report being the slogan “let managers manage”.

The Glassco Commission Report was heavily influenced by the writings of management theorist Henri Fayol. The report stated that internal — or ancillary — services (such as the purchasing administration) were only means that served the execution of government programs aimed at the public. Integration of the internal service branches of government into delivery of services to the public, would provide a basis for enhanced cost recovery, at least as far as possible, and would allow greater awareness and accountability with respect to the true cost of government services, where cost recovery was not realistic.

Unfortunately, experience with full-scale decentralization rarely generated the benefits that were promised in its favour. In reaction, recent decades have seen a steady shift to a more centralized approach to purchasing by virtually all large and mid-sized municipalities, and even some smaller municipalities have moved in this direction — a trend that is only now ending at the municipal level, due to the financial impact of downloading.

Quite frequently, at least, low dollar purchases will be carried out on a decentralized basis. Subject to that qualification with respect to small purchases, the centralized approach is now clearly more typical.

The underlying goal in centralization has been to improve the efficiency and effectiveness of the procurement process, to increase value to the municipality. The underlying goal in centralization has been to improve the efficiency and effectiveness of the procurement process, to increase value to the municipality. The benefits to be delivered from a centralized approach can, of course, be oversold, but in general a centralized approach, based on a dedicated purchasing department of similar office, has several advantages, these include:

  • Training and development of purchasing skills is also facilitated using dedicated staff. A centralized system allows peer support arrangements, such as mentoring.
  • Because material and service needs of different departments can be similar, by pooling procurement, the buyer will develop greater knowledge and expertise relating to a particular (common) type of procurement than would be possible, if he or she served only a single department.
  • The full history of all purchase orders is maintained in a central record and can be tracked from one system. This feature facilitates the audit process.
  • The use of a dedicated staff maximizes continuity and standardization across the entire organization.
  • Centralization permits consolidation of similar orders, thereby permitting the municipality to achieve quantity discounts and other economies of scale.
  • Centralization of purchasing simplifies integration of purchasing operations with the legal advisors of the municipality.
  • Centralization within a municipality facilitates cooperative purchasing with other municipalities.
  • Administrative duplication can be reduced.

Centralized purchasing is not intended to exclude operating departments from procurement decisions. Buyers must be responsive to the needs of such departments.

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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