1. 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?
WHAT ARE SOME OF THE CONSIDERATIONS IN DETERMINING LOWEST OVERALL COST? PURCHASE PRICE, OPERATION COST (ENERGY, CONSUMABLES), MAINTENANCE, PERFORMANCE (!), LABOR/ADMIN COSTS, DISPOSAL. WHAT AFFECTS COST: NEXT SLIDE.

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: BUY/DON’T BUY
SPECIFICATIONS
SOURCING STRATEGIES
TERMS AND CONDITIONS
COMPETITION
ADMINISTRATION

8. 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

9. 1B. SPECIFICATIONS Do Cost Considerations Affect Specifications?
Do Specifications Affect Costs?

10. 1B. SPECIFICATIONS Factors That Influence Cost: TOO RESTRICTIVE
UNCLEAR
TOO BROAD
AWARD CRITERIA
NEGOTIATION STRATEGIES
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 GENERAL CONDITIONS SPECIAL CONDITIONS
MUTUAL OBLIGATIONS
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/Contracts
Considerations:
BUY/DON’T BUY
SPECIFICATIONS
SOURCING STRATEGY
TERMS & CONDITIONS
PRICE COMPETITION
ADMINISTRATION
HOW DO THESE TYPICALLY OPERATE? HOW CAN YOU IMPROVE THEIR OPERATION? E.G. CONTRACTS, POLICIES, LIMITS IN THE CARD

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. FOR ALL METHODS CONDISER:
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?
DOES YOUR ORGANIZATION ESTABLISH A BALANCE BETWEEN CENTRALIZED AND DECENTRALIZED PURCHASING PROCESSES? THIS BALANCE ALSO AFFECTS COST CONTROL. TAKE A LOOK AT DHSMV MEASURES IN HANDOUT FOR SECTION 8.

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?
BY “WHAT’S THE RELATIONSHIP” WE MEAN WHAT COMES FIRST? THE CUSTOMER CARES, BECAUSE THE FIRST AFFECTS THEIR PERFORMANCE DIRECTLY AND IMMEDIATELY, AND THE LATTER AFFECTS FINANCIAL RESOURCES FOR OTHER GOALS & RESPONSIBILITIES.

22. THE CONCEPT OF BEST VALUE
V=Q/P