PUBLIC PURCHASING IN FLORIDA COST CONTROL IN PUBLIC PURCHASING (REV. 05/08)

PUBLIC PURCHASING IN FLORIDA

COST CONTROL IN PUBLIC PURCHASING

(REV. 05/08)

2

COST CONTROL: MISSION SPECIFIC MISSIONS OF GOVERNMENT

PROCUREMENT VARY WITH…

ADMINISTRATIONS, CIRCUMSTANCES, NEAR-TERM OBJECTIVES

3

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.

4

COST CONTROL MECHANISMS

HOW IS COST CONTROLLED?

5

COST CONTROL

Is the answer competition?

What is the relationship between “low bid” and “lowest overall cost?”

What affects the costs?

6

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)

7

1. Purchasing Cycle

Contains Six Component Units:

A. BUY/DON’T BUYB. SPECIFICATIONSC. SOURCING STRATEGIESD. TERMS AND CONDITIONSE. COMPETITIONF. ADMINISTRATION

8

1A. Buy/Don’t BuyWhat Factors Influence this Decision?

NEEDS/WANTS RESOURCE AVAILABILITY COST AND BUDGET QUALITY SCHEDULE RISK FLEXIBILITY ACCOUNTING RULES FEDERAL SPENDING REQUIREMENTS POLITICS

9

1B. SPECIFICATIONS

Do Cost Considerations Affect Specifications?

Do Specifications Affect Costs?

10

1B. SPECIFICATIONS

Factors That Influence Cost:

o TOO RESTRICTIVEo UNCLEARo TOO BROADo AWARD CRITERIAo NEGOTIATION STRATEGIESo UNNECESSARY REQUIREMENTS

11

1C. SOURCING STRATEGY

SPEND ANALYSIS INTERNAL PROFILE EXTERNAL PROFILE ITEMS OF BID PROCUREMENT METHOD TERM AWARD FORMULA

12

1D. Terms and Conditions

o GENERAL CONDITIONSo SPECIAL CONDITIONSo MUTUAL OBLIGATIONSo RISK (What’s this got to do with

purchasing?)

13

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)?

14

1F. ADMINISTRATION

CONTRACT MANAGEMENT DISPUTE RESOLUTION (Is there one

right answer?) RENEGOTIATION LESSONS LEARNED PLANNING FOR THE FUTURE

15

2. PURCHASING INSTRUMENTS

Which Instrument is Best?

PURCHASING CARDS PURCHASE ORDERS CONTRACTS

16

Pcards/PO’s/ContractsConsiderations:

BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION

17

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.)

18

3. PURCHASING METHODS

FOR ALL METHODS CONDISER:

BUY/DON’T BUY SPECIFICATIONS SOURCING STRATEGY TERMS & CONDITIONS PRICE COMPETITION ADMINISTRATION

19

5. PURCHASNG ORGAINZATION

CENTRALIZATION VS

DECENTRALIZATION

MEASURE YOUR EFFECTIVENESS

20

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?

21

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?

22

THE CONCEPT OF BEST VALUE

V=Q/P