Procurement Perspectives: Why organizations need to govern their purchasing activities

All organizations must have purchasing policies and procedures in place to govern their purchasing activity.

In this respect, municipalities are no different. Consistent with the highest principles of proper corporate governance, the purchasing bylaw or other procurement policy of a municipality should incorporate:

• Clarity of objective: The policies must afford a clear sense of purpose to determine the manner in which the authorities conferred under those policies and how they are to be directed. One of the benefits of harmonization procurement policy with overall municipal strategy is that it provides such clarity of objective.
• Clarity of mandate: It should be clear where responsibilities lie for each aspect of the procurement program.
• Clarity of authority: It should be clear who has the authority to requisition, who has the authority to approve requisitions and who has the authority to place orders and approve invoices.
• Public accountability and awareness: there must be full disclosure of the rules governing municipal procurement and some method of verifying compliance with those rules.
• The ultimate goal of these policies should be to develop a cohesive and co-ordinated approach to procurement in which all members of the municipal administration are singing the same song, with the same words, to the same tune, in the same key.

Prevailing practice is to include in the purchasing bylaw or policy an express statement that all municipal employees are required to comply with all applicable bylaws and policies of the municipality and any relevant federal or provincial law.

To derive the maximum benefit from governing policies and procedures, it is highly advisable that both staff and suppliers are made aware of the rules that apply to a given contract.

Such rules must be clearly stated. There must be some authoritative method provided of resolving any ambiguity or closing any gap that is identified once the contract competition begins.

For any public entity, compliance with policy and procedure is more than half the battle. Making sure staff and suppliers are up-to-date on the latest changes will cut down considerably on the number of problems that arise.

To do so, policies and procedures of the municipality should be widely disseminated within the organization. Training should be given as to their meaning and application.

As discussed above, the policies and procedures governing municipal procurement are based on the premise that to as great an extent as possible, every step in the process should be open and fair.

If it is not practical to follow an open procedure (e.g., because of the low value of the transaction), the procedure that is followed should be conducted in accordance with pre-defined rules and be defensible in the circumstances.

The emphasis thus falls on the monitoring of compliance with rules. The operating premise among all municipal staff should always be the compliance with established policy and procedure is mandatory.

No doubt, the rules in question will sometimes be found deficient. Therefore, some mechanism should be in place for evaluating and revising them on a regular, perhaps even ongoing, basis as new problems are identified.

Nevertheless, until such time as the rules are changed, compliance remains essential. When departures from the rules are essential in the circumstances (as will sometimes be the case), they should be authorized by senior management and a clear explanation should be formally recorded as why the departure is being sanctioned.

It is never acceptable for an individual municipal employee to decide to go off on a frolic of his or her own. Compliance with policy and procedure does much to maintain public accountability and public trust in municipal procurement.

Exceeding budget authorization or going beyond one’s level of signing authority presents obvious governance problems. In terms of accountability, assessing compliance sets an objective yardstick by which performance can be measured.

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.