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January 22, 2013

Procurement Perspectives | Stephen Bauld

Municipal process and procedures

Generally, many of the techniques and theories that have evolved in the private sector with respect to procurement apply to public sector procurement as well. However, the normal conventions of private sector purchasing practice — its assumptions, theory, and the manner in which it carries on procurement — need to be modified to satisfy the overriding concerns that public procurement be carried on in a way that is open, fair, and transparent.

Thus, there is a strong preference in municipal procurement for the use of a tender based system, while the direct negotiation approach which dominates the private sector field, is utilized only in exceptional situations. In past columns, I have discussed the need to focus procurement decisions on the best buy: the option which offers a municipality the lowest full-life cost. I have also discussed how such an approach complicates the use of the tender process.

The problem is that without a focus on the strategic objectives of a municipality, concerns with process and procedures may deteriorate into excessive pre-occupation with form, with insufficient regard to the purpose that the process and procedure is intended to serve.

Stephen Bauld

Procurement

Stephen Bauld

No one expects the government to make a profit. However, the public does not want, nor should it tolerate, a government that is inefficient to the point of being wasteful. The current compliance based focus on municipal corporate control is fine if the goal is to ensure that rules are followed to the letter (e.g., that a spurious declaration is found in a file confirming that a carpet cleaner is the “sole supplier” of carpet cleaning in a major city, so as to justify a departure from a competitive quotation requirement). It falls short of the mark, if the goal is to ensure that the service targets of a municipality are met in the most cost-efficient way.

One of the biggest problems in public procurement — attested to in published audit reports everywhere — is the tendency towards sole sourcing.

Often such transactions proceed because the right forms are all filled and the right signatures are in place. Municipal bylaws allow dealing with a single supplier, where that supplier is the only supplier offering goods and services of a particular kind.

Very often, however, municipal staff seems unable to make an informed judgment as to whether this is in fact the case. Municipal staff at both the client department and purchasing level needs to be trained to be more critical in dealing with claims made by outside suppliers. For instance, carpet cleaners do not become sole source suppliers merely because they manage to convince a sectional manager that they employ a “secret process” in cleaning carpets. Nor is a contractor a sole supplier merely because it holds a provincial licence to carry out on a particular type of trade, such as hazardous waste clean-up. Generally, federal and provincial governments do not create monopolies when granting such licences.

As with all other aspects of procurement, managerial perceptions that a particular supplier is a sole source need to be subjected to a process of critical review.

The primary objective of the procurement system should be to demonstrate that the best value was received for money expended, not simply that procedures were followed as literally cast. Rules should be followed. Buyers should be expected to know the rules and follow the rules. But they should also be expected to demonstrate how they have worked within the rules to secure the best value for the municipality that they serve.

Procurement rules need to be brought in line with the overall objectives of the municipality to service the needs of its residents on a cost-effective basis.

Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.

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