HomeMy WebLinkAboutM-97-0117Procurement Assessment Team Report
State Can Provide
Section A City Charter, City Code, and Policies
* 1. Review of New Language
* 2. Assistance with Calculation of Bid Limits - Recognized Price Index
Section B 80/20 Rule
* 1. Provide Access to Electronic State Contracts and Agreements at No Charge
* 2. Procurement Card - through Nations Bank at Appropriate Time
Section C Procurement Organization
* 1. Work with Staff and Departments to Better Understand the Purchasing
Function
* 2. Facilitate NIGP Training on Site to Include
A. General Purchasing
B. Specification Writing
C. Negotiations
Purchasing Department has two CPPB's and
Section D Automation Issues
* 1. Facilitate Installation of Suncom Network for Data Transmission
- Approximately 60% of Traffic is Data 40% is Voice
* 2. Facilitate PC Application Training
Section E Customer Perception
* Not Applicable
Section F Purchasing Safeguards
* 1. Assist with procurements Training of City Departments upon Completion
and Distribution of a New Purchasing Manual
Submitted by:
Edward G. Tolliver
City clle6C
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Executive Summary
A recent assessment of the City of Miami's acquisitions process revealed deficiencies in
the City's procedures, training, and communication. The recommendations contained in
this report are intended to illuminate these deficiencies, as well as promote
the following management objectives:
• maximize competition to achieve significant cost savings;
• provide for authority and accountability at appropriate operating
levels;
• concentrate efforts toward "value added" customer service;
• provide for rules and procedures for the conduct of
activities;
• provide for training and retraining of those responsible for adminis-
trative tasks and those who depend on these services;
• provide for open communication between those responsible for
administrative tasks and those who depend on these services; and
• provide for monitoring of the purchasing function.
This assessment urges the development of understandable and workable procedures to
restore efficiency and effectiveness to the purchasing area. These procedures should:
define the processes and systems within the department and the authority and relation-
ship of the department with other departments; cover routine situations and operations;
provide a guide for meeting unusual conditions or problems; promote consistent and fair
relations; facilitate uniform action by personnel; standardize routine procedures; facilitate
training of new employees; and stimulate new ideas and suggestions for improving
operations.
These procedures should provide guidance, but sound qualifications and knowledge of
systems and practices by employees are of the utmost importance. The assessment urges
extensive training for employees in the Purchasing Department. Additionally, user
departments should be provided special training in administrative procedures once these
are implemented.
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Executive Summary continued
The assessment urges the assignment of purchasing authority to the Purchasing Depart-
ment, with only the City Manager or the City Manager's designee having authority to
alter their decisions. The assessment recommends procedures and training that will aid in
restoring confidence in the acquisition processes; however, open communication must be
established for improvements to occur. Management leadership will be essential in
fostering good communications and in strengthening acquisition activities in the
Purchasing Department.
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Introduction
An assessment team, comprised of purchasing administrators in State, County and
City governments, was formed to review the management and operation of the City of
Miami's Purchasing Department at the direction of William H. Lindner, Secretary,
Florida Department of Management Services and George C. Banks, Director of State
Purchasing. Members of the review team included:
Glenn R. Cummings, CPPO
Director, Purchasing Division
Broward County Board of Commissioners
Kevin Gaston
Senior Administrator/Purchasing
Orange County Public Schools
Warren E, Geltch, CPPO, C.P.M., CPCM
Chief, Purchasing and Contracts
Orange County
Theodore J. Grable
Director, Purchasing and Contracts Department
Hillsborough County Board of County Commissioners
Louis Moore, CPPO, CPPB
Director, Purchasing and Materials Management
City of St. Petersburg
Edward G. Tolliver, CPPB
Chief of Purchasing -Standards
Florida Department of Management Services
The two -and -one -half -day assessment by these individuals was limited to verifying
that technical assistance as requested by the Department was indeed necessary, that
appropriate controls were in place, and that the purchasing function was being admin-
istered in a centralized manner with clearly defined policies and procedures.
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Scope of the Review
The scope of our review extended to the following activities:
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1. Interactions and interviews between requisitioning and purchasing
departments: Specifically, the Police Department and General Services
were interviewed to ascertain answers to the following questions:
• What is your relationship with Procurement?
• What is the response time for small purchases and services?
• How would you rate the overall service of Procurement?
• Tell us about acquisitions above $4,500.00.
• Would you like to have delegated authority to purchase up to
$5,000.00 and would you take responsibility to provide three quotes?
2. Review of the City Charter and City Code relating to Procurement.
3. Review of Management Reports such as KPMG Peat Marwick
4. Please Note: This assessment did not include a review of Construction
Contracts or Architectural and Engineering (A&E) Contracts. Nor is this
assessment intended to be or replace a department audit.
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Findings and Recommendations
A. City Charter, Code and Policies
Finding
City Charter language governing procurement practices is not conducive to effective and
efficient governmental purchasing. We noted that by placing a dollar amount ($4,500.00)
in the City Charter for bid requirements, without provisions to annually adjust the
amounts based upon the rate of change of a nationally recognized price index, increased
workload by not keeping pace with consumer expectations.
Recommendation
We recommend suspending or pre-empting the City Charter as it relates to purchasing
and removing Procurement Division references from said document (i.e., Sections 28 and
29A). Additionally, until such time as new language can be adopted, the City should
operate under selected portions of Chapter 287, Florida Statutes (F.S.), to be determined
by legal counsel.
Finding
The City Code regarding procurement restricts and impedes the efficiency of City
departmental operations.
Recommendation
f The City should adopt a new procurement code which emphasizes
current practices.
• Suspend local preference laws which may limit competition and opportu-
nities to reduce cost.
.� • Delegate authority to purchasing manager to approve all acquisitions up
to Category Four under Section 287.017, F.S.
• Bid limit adjustment to recognized price index.
• Eliminate City Clerk's involvement as it relates to bid openings — this
should be a function of purchasing.
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• Update and revise procurement manual incorporating revisions to the
City Code.
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B. Tactical vs. Strategical Purchasing (80120 Rule)
Finding
1. Because the major focus is on small dollar purchases, large purchases do
not receive adequate attention to minimize cost and maximize savings.
Approximately 90 percent of the purchase orders issued by the City are
for less than $4,500.00, and they account for only about eight (8) percent
of the total dollar volume spent. Phrased in another way, this means that
90 percent of the time and effort of City purchasing personnel is used to
assure that eight (8) percent of the dollars are spent in accordance with
correct purchasing procedures. Conversely, this indicates that the re-
maining 92 percent of the dollars spent receive only 10 percent of the time
and attention of the Purchasing Department.
It would be in the City's best interest to subject the Larger dollar volume
items to greater scrutiny by Purchasing and reduce the amount of time
spent pursuing small dollar items. The spreadsheet below provides an
illustration of how the City currently focuses on small dollar purchases.
This data was provided by the City's Procurement Division at the request
of the Assessment Team.
95/96 I)AA..A
Dollar
Number
Percent
Dollar
Percent
Range
Requests
Value
500
2,541
41.61%
559,549
0.67%
501-1000
940
15.39%
697,172
0.83%
1001--4500
2,092
34.26%
5,667,788
6.75%
4501-10,000
161
2.64%
1,137,909
1.36%
10,001-15,000
69
1.13%
889,499
1.06%
15,001-20,000
3
0.54%
579,981
0.69%
20,001
271
4.44%
74,441,629
88.65%
Totals
6,107
100.00%
83,973,527
100.00%
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Recommendation
The City should shift its focus from small dollar purchases to large dollar purchases for
commodities and goods. Furthermore, the City should delegate small purchases to user
departments while providing adequate safeguards which ensure sound fiscal controls.
Moreover, procurement of personal and professional services should be centralized
within the Procurement Division to allow for consistent application of the process of
obtaining the highest quality goods and services at competitive market prices.
Finding
There is insufficient use of existing contracting alternatives such as State Contracts,
Cooperative Bids, and other agency contracts (piggyback).
Recommendation
State Contracts, SNAPS Agreements, and other contracting methods offered by the State
of Florida and other public entities can and should be used to reduce administrative costs
and reduce delays in receiving goods and services by user departments. Increased use of
term contracts and blanket purchase orders will also facilitate the procurement process.
C. Procurement Organization
Finding
The Chief Procurement Officer, although a talented and capable administrator, may be
over extended with her additional duties as Director of the Equal Employment Office,
and Coordinator of Minority Business Development as cited in the Strategic Financial
Recovery Plan.
Recommendation
We recommend that the Chief Procurement Officer be trained in the public purchasing
profession with procurement activities as his/her primary responsibility. It is also
recommended that this position report at a sufficiently high level in the organization,
such as the City Manager or the City Manager's Designee, to delegate authority over the
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procurement operation.
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Finding
2. Staff within the Procurement Division generally lack the necessary skills
and knowledge to perform the purchasing function at an expected level
of proficiency.
• Procurement education and training will enable staff to perform at
expected levels
Note: In the past staff has paid for procurement courses with per-
sonal funds.
• Interaction (i.e., visits) with customers (user departments/divisions)
to better understand their requirements should be a high priority
within the department, however, this rarely occurs
• Lack of knowledge regarding commodities and services was demon-
strated during our interviews with staff
• Clerical staff orientation to the job being performed
• The current City policy regarding the staff selection process hinders
hiring qualified professionals
Recommendation
Provide needed training, which should be included in the City's budget, and certification
should be encouraged for all professional staff and required in the staff selection process.
Improve Procurement staff's understanding of customer needs with site visits and
emphasize the professional status of Procurement.
Finding
3. Staff levels are generally sufficient, provided the Procurement Division
appropriately focuses on high dollar purchases.
Recommendation
Shift staff resources from small dollar purchases to large dollar purchases and eliminate
work that does not add value or is redundant.
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D. Automation Issues
Finding
1. Full use of existing technology is not being exercised.
• SCI (System Consultant, Inc.) not fully operational
• APS (Automated Purchasing System) not fully implemented
• Police have one computer,1,500 employees, and a 96 plus million
dollar budget
• Incomplete integration between Purchasing and Accounting systems
• Memos rather than requisitions to initiate Bids/RFP's
Recommendation
Obtain a professional needs assessment of the technology requirements of the City's
procurement process (especially looking at integration of SCI and APS).
Retain the services of APS to complete the implementation of all three procurement
purchasing modules, which the City already owns.
Eliminate all non -automated procurement requests. Purchase requisitions should be
issued to trigger procurement actions rather than memos. This will reduce/eliminate
unnecessary purchasing actions or non -committal of funds for specific procurements.
Finding
2. Procurement staff and user departments are not sufficiently trained on
existing purchasing/financial systems and other automation processes.
Recommendation
All professional staff must have adequate training on personal PC applications, including
spreadsheets, word processing, Internet, etc., to improve their analysis and decision -
making ability. City-wide departmental training on financial and procurement systems
should be a requirement, not an option.
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E. Customer Perception
Finding
1. Customers perceive the purchasing system as an impediment to accom-
plishing their tasks, along with:
• City Commission approvals which may take as long as six weeks
• Lack of automation for routine inquiries
• Inadequate contract specifications to procure goods and services at
needed quality levels
Recommendation
Develop and issue a comprehensive customer survey to determine satisfaction with the
purchasing process and identify deficiencies so that remedies can be implemented. Also,
increase technical skills by training purchasing staff and customers.
F. Purchasing- Safeguards
Finding
The current procurement system does not provide adequate safeguards for:
• Minimizing unauthorized purchases
• Tracking and monitoring contracts
• Evaluating vendor performance
• Contract administration
• Control of emergency purchases
Recommendation
Upon completion and distribution of a new Purchasing Manual, all City departments
should be trained by Procurement with follow-up training being provided annually. The
City should also consider providing new employees with procurement training (includ-
ing developing specifications and obtaining proper quotations) as a part of new employee
orientation.
We recommend that Procurement establish a feedback loop to assist with vendor perfor-
mance and contract administration, thus providing essential information for future
contracting.
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Finally, we recommend that all department heads be required to certify that an emergency
existed in accordance with approved criteria for making such acquisitions.
Conclusion
The Findings and Recommendations contained herein are not intended to be the panacea
for all of Miami's purchasing problems. An in-depth audit of the Procurement Division
should be performed as soon as possible to help the City identify additional corrective
actions that should be taken. Two organizations that can assist with this type of service
are:
The National Institute of Governmental Purchasing, Inc. (NIGP)
11800 Sunrise Valley Drive, Suite 1050
Reston, Virginia 20191-5303
The Florida State University (FSU)
College of Business
Tallahassee, Florida 32306
Attention: Melvin T. Stith, Dean
Leadership within the City must begin immediately to disassemble any and all policies
and procedures that will prevent Procurement personnel from becoming 21st Century
professionals. This can be looked upon as a means of achieving one of the City's objec-
tives: To deliver quality service at a reasonable cost.
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