The adoption of a systematized approach towards municipal purchasing does not necessarily imply the need for a full time purchasing staff, increased bureaucracy or voluminous, all-encompassing regulations.
Two basic approaches can be considered by municipalities of all sizes, namely:
- A policy and procedure-based approach, under which all municipal officers to whom purchasing authority is delegated are required to adhere to pre-defined rules. Under this approach, municipal officers are prohibited from acting in a manner contrary to approved policy and procedure.
- A guideline-based approach, under which municipal officers are expected to comply with defined general standards governing procurement, but are allowed the discretion to go outside of those rules, where they can establish that it is in the best interest of the municipality to do so.
Each of these approaches is intended to supplement rather than replace the general fiduciary obligation of municipal officers to act in honesty, good faith and with a view towards the best interest of the municipal corporation.
A minimalist approach requires little more than the adoption of guidelines to regulate the purchasing process. Such guidelines will give stronger fiscal control and, over the long-term, present greater opportunities for cost savings.
Minimal procurement guidelines do not necessarily require the loss of independence, but they are intended to ensure consistency in the exercise of that independence and to provide a basis for due diligence monitoring of the manner in which delegated authority is discharged. Typically, guidelines include provisions and dollar levels as to when competitive quotes or tenders ought to be sought.
Some of the issues that will normally be addressed in such guidelines are the so-called “Rule of Three” when obtaining oral or written questions; the solicitation of informal written bids; and the use of tenders, sealed bids and proposals.
These types of competitive pricing actions can be performed through a centralized action by the finance (or purchasing) department, by the clerk’s office or, in most cases, by the ordering department, if proper guidelines are in place and formats are available for the types of action. The problem with a guideline-based approach is that it is too flexible to be workable.
Ultimately, every case can be rationalized as being sufficiently exceptional to justify a departure from the guideline.
Accordingly, most municipalities fix firm rules to govern the procurement process. Firm rules of the nature may be described as policies.
Purchasing policies are among the most important mechanisms at the disposal of a municipality to ensure integrity in public contracting.
Therefore, it is not surprising to find that the Municipal Act expressly declares itself in favour of a policy-based approach to municipal procurement.
Purchasing policies are not guidelines to be observed when convenient and ignored in other cases. While policies ought to be sufficiently flexible to reflect the practical requirements of day-to-day purchasing activity, they set the perimeters for that activity.
It is no answer to a complaint of failure to adhere to prescribed policies, that in so doing the buyer in question was seeking to act in the best interests of the municipality.
While pure policy and procedure, as opposed to pure guideline-based approaches, represent the extreme archetypes of procurement control, a wide range of hybrid forms incorporating differing elements of each of the above approaches are also possible.
Indeed, some combination of these archetypes is generally preferable for while a strict policy and procedure approach tends to be inflexible (and therefore unsuitable to all situations), the use of nothing more than guidance will often be found to be insufficient to ensure corporate governance concerns are properly addressed.
The policies fixed by a municipal council should be set by it on the understanding that by fixing a limit, it is quite possible that good purchasing opportunities may have passed by as a result, and that from time to time, cost to the municipality may increase.
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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