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Welcome to “Fundamentals of Purchasing”

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Earning CPE

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Today’s Presenter

Dave LaklyPublic Service Associate

Fundamentals of PurchasingPresented by: Dave Lakly

dlakly@uga.edu

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Learning Objectives Recall the functions and goals of purchasing

Recall the steps of the purchasing cycle

Identify the importance of writing solicitations

Define the process of issuing the requisition and purchase order

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Public Sector Purchasing

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What makes public sector purchasing different?• Protection of public funds• Competition• Open/transparent• Value• Legality

Public Sector Purchasing

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Materials Management

Supply Chain Management

Commodity Management

Supplier Management

Contract Administration

Functions

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Maximize savings by obtaining the best value for each tax dollar spent

Goals

Efficiency

EconomyEffectiveness

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• Honesty• Integrity• Ability to Multi-Task• Attention to Detail• Assertiveness• Sense of Responsibility

Quality Purchasing Staff

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Independent entity formed to govern and administer the Certified Public Procurement Officer (CPPO) and Certified Professional Public Buyer (CPPB) certification programs

https://www.uppcc.org/Certification

Universal Public Procurement Certification Council

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To be effective, purchasing must have

Responsibility

Authority

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• Exemptions• Ethics• Other policies• Authority• Procedures• Purchasing thresholds• Process• Sole purchase• Emergency purchase

Writing a Policy

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Sample Thresholds:

• Purchases between $0 and $5,000 – authorized staff members will obtain at least two verbal quotes.

• Purchases greater than $5,000 but not greater than $20,000 –authorized staff members will obtain at least three written quotes.

• Purchases greater than $20,000 use sealed, written bids or proposals.

(Additional examples, Cities of Callaway, Edgewater)

Policy Examples

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Purchasing’s goal to maximize savings by obtaining the best value for each tax dollar spent is accomplished by…A. Ethics, economy and expediting.B. Honesty, integrity, and sense of responsibility.C. Efficiency, effectiveness, economy. D. Responsive bids and responsible bidders.

Knowledge Check

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Steps in the Purchasing Process

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Steps in the Purchasing Process

1 • Determining Need

2 • Verifying Availability of Funds

3 • Writing Specifications

4 • The Requisition

5 • Method of Purchase and Solicitations

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Steps in the Purchasing Process (cont’d)

6 • Evaluation and Award

7 • Preparation of PO or Contract

8 • Monitoring of Delivery

9 • Receipt of Goods or Services

10 • Capital Assets

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1. Determining need: the user department determines a need and requisition is submitted to purchasing

2. Verifying availability of funds: fund availability is determined according to your:• Operating Budget• Capital Projects Budget

Purchasing Process

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3. Writing Specifications• Written by the user department• Describe requirements of products or services• Written at the correct quality level

Purchasing Process

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3. Writing Specifications(cont’d)

Purchasing Process

Before writing them, research

similar solicitations, review the web,

brochures, catalogs, and other materials

Include performance expectations (usually for

RFPs)

Include physical characteristics

Write them clearly and

accurately to describe minimum

requirements

Write them in a way that they do not

restrict competition

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“It’s unwise to pay too much, but it’s also unwise to pay too little. When you pay too much, you lose a little money, that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was thought to do.”

- John Ruskin Art Critic & Social Commentator

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4. The requisition should contain• Date the item is needed• Budget coding information and approval• Description of the item• Suggested vendors• Quantity, estimated costs & delivery location

Purchasing Process

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5. Method of Purchase and Solicitations will depend on• Dollar amount – formal or informal• Is the request for a product, equipment, or service• Requirements of the user department

Purchasing Process

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After the need for a purchase is determined by a user department which of the following should be confirmed first?A. Requirements of the products or servicesB. Availability of fundsC. The preferred vendorD. Method of purchase

Knowledge Check

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6. Evaluation and Award• The department usually evaluates the bids and

makes a recommendation• Bids are evaluated for technical compliance and to

ensure that they are recommended for award to a responsive and responsible vendor

• Final approval of award is based on the dollar amount

Purchasing Process

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"Responsive" simply speaks to a bidder doing as has been requested. If a bidder has to provide three references, did the bidder do so? If the bidder has to submit a notarized affidavit of some sort, did the bidder do so?

"Responsible" means that the bidder is able to accomplish the task(s) being requested. If a bidder says that they can provide green widgets, can they? If the request is to build a bridge, has the bidder adequately done so before? After all, citizens wouldn't want to use that bridge if it weren't constructed by a competent, experienced, and "responsible" builder.

Closer Look

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7. Preparation of Purchase Order or Contract• Name and address of vendor• Shipping address• Expected delivery date• Quantity and measure of unit• Description of what is to be purchased

Purchasing Process

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7. Preparation of Purchase Order or Contract (cont’d)

• Unit cost, extended cost and total cost• Transportation and FOB Point• FOB Source – ownership takes place on the

vendor’s dock• FOB Delivery – ownership takes place on the

buyer’s dock

Purchasing Process

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7. Preparation of Purchase Order or Contract (cont’d)

• Name of person to contact for questions• Accounting information• Authorized signature of issuer• Date purchase order issued

Purchasing Process

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Purchase Order Example

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8. Monitoring Delivery• Who receives actual delivery is dependent on

the size of the organization • Ensure items are shipped to correct address• Copy of purchase order forwarded to user

department

Purchasing Process

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9. Receipt of goods or services• Upon receipt, someone should verify:• Quality• Quantity• Documentation• Verify items are “per specification”• Testing & storage

Purchasing Process

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10. Capital Assets• Purchases that qualify for capitalization should

be identified during the purchasing process• Must be tracked in the capital asset

management system

Purchasing Process

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10. Capital Assets (cont’d)

• Disposal:• Declare unusable items as surplus and sell,

donate or destroy• Methods of disposition

• Sale or donations• Public auction• Sealed/spot bids• Trade-ins

Purchasing Process

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“FOB Delivery” ownership takes place at…A. The buyer’s dock.B. The vendor’s dock.C. The shipping point.D. Time of payment.

Knowledge Check

4040

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