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Learn how the mission of government procurement is to provide customers with what they need at the lowest overall cost. Explore cost control mechanisms, including the purchasing cycle, instruments, methods, and organization.
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PUBLIC PURCHASING IN FLORIDA COST CONTROL IN PUBLIC PURCHASING (REV. 05/08)
COST CONTROL: MISSION • SPECIFIC MISSIONS OF GOVERNMENT PROCUREMENT VARY WITH… • ADMINISTRATIONS, • CIRCUMSTANCES, • NEAR-TERM OBJECTIVES
COST CONTROL: MISSION • The underlying mission of governmental purchasing is, to provide the customers what they need, when and where they need it, at the lowest overall cost, considering both prices and program administration within the scope of the law.
COST CONTROL MECHANISMS • HOW IS COST CONTROLLED?
COST CONTROL Is the answer competition? What is the relationship between “low bid” and “lowest overall cost?” What affects the costs?
COST CONTROL Cost control is impacted by four mechanisms: 1. PURCHASING CYCLE (6 steps) 2. PURCHASING INSTRUMENTS (3 types) 3. PURCHASING METHODS (8 methods) 4. PURCHASING ORGANIZATION (2 types)
1. Purchasing Cycle Contains Six Component Units: • BUY/DON’T BUY • SPECIFICATIONS • SOURCING STRATEGIES • TERMS AND CONDITIONS • COMPETITION • ADMINISTRATION
1A. Buy/Don’t Buy What Factors Influence this Decision? • NEEDS/WANTS • RESOURCE AVAILABILITY • COST AND BUDGET • QUALITY • SCHEDULE • RISK • FLEXIBILITY • ACCOUNTING RULES • FEDERAL SPENDING REQUIREMENTS • POLITICS
1B. SPECIFICATIONS • Do Cost Considerations Affect Specifications? • Do Specifications Affect Costs?
1B. SPECIFICATIONS Factors That Influence Cost: • TOO RESTRICTIVE • UNCLEAR • TOO BROAD • AWARD CRITERIA • NEGOTIATION STRATEGIES • UNNECESSARY REQUIREMENTS
1C. SOURCING STRATEGY • SPEND ANALYSIS • INTERNAL PROFILE • EXTERNAL PROFILE • ITEMS OF BID • PROCUREMENT METHOD • TERM • AWARD FORMULA
1D. Terms and Conditions • GENERAL CONDITIONS • SPECIAL CONDITIONS • MUTUAL OBLIGATIONS • RISK (What’s this got to do with purchasing?)
1E. COMPETITION • How does competition lower prices and costs? • How much? • How does it compare to the other factors (buy/don’t buy, specs, strategy, terms & conditions, administration)?
1F. ADMINISTRATION • CONTRACT MANAGEMENT • DISPUTE RESOLUTION (Is there one right answer?) • RENEGOTIATION • LESSONS LEARNED • PLANNING FOR THE FUTURE
2. PURCHASING INSTRUMENTS Which Instrument is Best? • PURCHASING CARDS • PURCHASE ORDERS • CONTRACTS
Pcards/PO’s/Contracts Considerations: • BUY/DON’T BUY • SPECIFICATIONS • SOURCING STRATEGY • TERMS & CONDITIONS • PRICE COMPETITION • ADMINISTRATION
3. PURCHASING METHODS • SMALL DISCRETIONARY PURCHASE • INFORMAL BID (RFQ’s) • FORMAL ITB, RFP AND ITN’S • SINGLE SOURCE • EMERGENCY PURCHASE • OTHER (Exempt, required by Statute, etc.)
3. PURCHASING METHODS FOR ALL METHODS CONDISER: • BUY/DON’T BUY • SPECIFICATIONS • SOURCING STRATEGY • TERMS & CONDITIONS • PRICE COMPETITION • ADMINISTRATION
5. PURCHASNG ORGAINZATION • CENTRALIZATION VS DECENTRALIZATION • MEASURE YOUR EFFECTIVENESS
5. PURCHASING ORGANIZATION CENTRALIZATION VS DECENTRALIZATION Can the office utilize: • P Cards? • Purchase Orders/Contracts? • Local Purchase Orders? • Cost of qualified staff? • Do they measure their effectiveness?
5. PURCHASING ORGANIZATION WAYS OF MEASURING PERFORMANCE • Do your customers get what they need when & where they need it? • Do they get it at the lowest overall cost? • Did the vendor perform? • Did your agency perform?
