The Risks of Decentralized Procurement

Many public agencies, especially smaller ones, do not have a centralized procurement and contracting function.  There are risks involved in such an organizational structure.

Educating Managers:  In a decentralized procurement model, it is up to each department and the directors and managers of those departments to understand what is permissible under applicable federal (if federal funding is involved), state, or local laws and regulations.

Complexities of Public Procurement:  Because public procurement is often complex, and operational departments have their own responsibilities and areas of expertise, without a centralized procurement function, often procurement activities occur that are in violation of applicable regulations.

Audit Finding:  The City of Arlington, Washington recently received an audit finding from the State Auditor's Office after the Fire Department contacted three vendors to provide quotes to provide a new ambulance for the city.  The city's 1994 vehicle had broken down and could not be repaired.  But the $128,142 purchase far exceeded the city's $7,500 threshold, above which formal advertised competitive bids should have been received.  Instead, the city only received one quote, informally solicited.  The Fire Department took the purchase to the City Council who approved the purchase, not realizing that the procurement needed to be either through advertised bids or approved by a specific emergency resolution.

Practical Tips:

1. Point Person:  Public agencies without a centralized procurement function should designate at least one person to become the resident expert on procurement and contracting.  
2. Approval Process:  There should be a deliberate internal approval process for purchases and contracts with checks and balances.
3. Policies and Procedures:  Agencies should develop clear procurement and contracting policies and procedures, making use of easy to follow checklist to help ensure compliance with regulations.   
4. Training:  Agencies should regularly provide training to personnel on procurement and contracting issues to raise the level of awareness.

Mike Purdy's Public Contracting Blog 

© 2011 by Michael E. Purdy Associates, LLC 

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