The Role of Purchasing Process in Government Entity

Purchasing process in a government entity entails all business procedures followed in the purchase, lease or rental of goods and services. The government has to be effective, ethical and efficient in purchase process to avoid loses and any audit queries that might arise from the buying process. The procurement procedure and strategy selected has to follow the core value and objective of the procured goods or services that would add value to the government. In this regard, a clear understanding of the goods or services to be procured, their importance, value and risk involved are considered to enhance service delivery and achieve the goal of the entity. Notably, governments tend to favor their country’s goods and services to promote domestic industries and for security reasons. The Federal Acquisition Regulation, a regulatory framework in the United States requires that all government principles such as accountability, openness, lawfulness, and value for money, fairness, and integrity are in place in to provide a standardized buying process (Preuss, 2009). Accordingly, this report outlines the purchasing process entailed in procurement procedures of a government entity. The report also looks into different aspects of procurement such as the role of procurement authority, state purchasing process, essentials of procurement and economics of government purchasing. The terms government entity and government are used interchangeably.

The Role of Procurement Authority in Government Purchasing Process

Procurement authority entails a foundational concept in practice in the public sector as well as in the administration of government. Through agency procurement systems, strategic and critical services, constructions and supplies are carried out or purchased in support of key public functions. Besides, the acquisition of required materials, the fundamental concern is how the government spend the taxpayers’ money used during the process so that citizens get value for their money (Preuss, 2009). Additionally, procurement process should be done in the interest of the public and be protected from undue influence.

Value for money in government purchasing means the mandate procurement institution getting the desired outcome at a possible best price rather than cheapest price (The Department of Treasury and Finance, 2017). An assessment of value for money requires a government entity to weigh the benefits of the purchases again its costs and among many factors that such agencies may consider while assessing value for money are as shown in the figure below.

Figure 1

Value for Money (The Department of Treasury and Finance, 2017)

Government entities delegate procurement authority to Chief Officers accountable to the governing bodies. The officers then carry out the process of procurement based on the principles and policies of the Institute of Public Procurement. The Institute of Public Procurement outlines different aspects entailed in the formulation of contracts, award as well as post-award modification of contracts.

Achieving effective, strategic, economical and ethical expenditures of public funds requires an establishment of the independent procurement function. The function maintains the advantages realized from best procurement practices that are carried out in a professional manner which in turn preserve the accountability and transparency of the practice needed for effective management of public entities and as such, uphold the public trust.

Preserving transparency and accountability means ensuring open and effective competition in the process (The Department of Treasury and Finance, 2017). As such, the procurement entities ensure impartial, competitive and open purchasing process achieved through:

Figure 2

Procurement Competition (The Department of Treasury and Finance, 2017)

Purchasing process in government entities should be designed with adequate flexibility and sufficient controls. The flexibilities and controls are achieved through periodic program reviews by external and internal auditors. The reviews help in providing recommendations that ensures the government purchasing process is done in accordance with the best practices.

State Purchasing Process

Purchases of contractual services and commodities in the government are common in several states across the U.S. and different countries around the world (Florida Department of Management Services, 2018). Therefore, every agency often sees a need to issue a competitive solicitation and makes states to leverage their buying power through states term contracts. The term contracts identify prices, contractors and the process of ordering contractual services for government agencies or other eligible users (Florida Department of Management Services, 2018). Notably, there are a number of contracts and agreements besides term contracts.

Economics of Government Purchasing

In economics, government purchases entail gross investments and expenditures by state, federal and local governments (Thai, 2001). The purchasing excludes interest on debt and transfer payments. In this regard, government procurement is a component of expenditure approach to calculating GDP. Hence, GDP= C+1+G+NX. Where C= consumption spending by households, I= Investments spending, G= government purchases and NX= net exports. The purchases are divided into federal spending including defense and nondefense as well as local and states spending. Government spending is among the areas that attract significant public attention hence the need for efficient, adequate and transparent procurement or purchasing process.

Ensuring government entities adequately utilize purchasing function calls for the agencies to gain a consolidated view of purchasing spend, streamline buying process, set high change aspirations as well as strengthen purchasing organizations (Husted & Reinecke, 2009). The purchasing process is the core of public sector performance because it entails significant amounts of expenditures hence has a substantial impact on budgets and government resources.

Essentials of Government Purchasing Process

The mission of government agencies in procurement (purchasing) process is to fulfill the public good and adequately using public funds through the application of various legal standards. Such laws or legal standards include Armed Services Procurement Act of 1947 and others. Government purchasing involves lengthy proposals and bidding processes. In this type of procurement, a government buyer can execute many purchase orders based on preapproved pricings and GSA schedules. Government contracts are involving and routinely give government suppliers explicit permissions of auditing their activities. The suppliers must comply with a series of government policies such as honoring the practices that uphold economic and social goals of the agency in question (Husted & Reinecke, 2009). Notably, the suppliers can terminate or change contracts entered with government procurement departments.

Purchasing Process within a Government Entity

Purchasing departments help government entities to manage finances through making adequate expenditure decisions The Michigan Municipal League, 2015). Through establishing visions of the entities, setting the tone of the organization and complying with relevant laws and regulations, procurement officials ensure government purchasing process meets set standards for operations. Public entities take into account relevant state statutes, charter provisions and local ordinances for the purchasing process to be effective and enforceable. Ideally, the buying process in the government involves the following steps:

Need Identification and Recognition

The process starts when a need for goods or services arises within a government entity. The step entails the search for the good and service that is going to be purchased or leased by an entity. A public entity’s objective is to add value but there may be other reasons for the purchase as outlined in this stage. The need to provide better services, enhance social responsibility and improve public image are among the many reasons that are also considered in the purchase process (McCue & Gianakis, 2001; Matthews 2005). At this stage, budgeting is necessary to avoid misappropriation of funds and reduce costs during the procurement process. A government entity should carry out adequate market research to avoid purchase risks that would lead to losses.

Pre-Solicitation Stage

Pre-solicitation stage entails seeking information, quotations, and proposals from viable suppliers in the country. Proper planning and understanding of organizational goals, needs and finances have to be done to ensure adequacy of the solicitation process. A proper management and leadership team is selected to search for information and give feedback from potential users and decision makers to coordinate a good pre-solicitation program (Kovács, 2011). The readiness of an organization towards the product or service to be purchased is considered at this stage. Moreover, the financial resources are normally assessed to create a clear budget for the goods and service to be procured.

During this stage, the government may use agents and officers within and outside an entity look into relevant issues associated the purchasing process. At the end of this stage, an entity ensures procedure of market analysis are carried out effectively, procurement requirements are met and stakeholders are involved. A pre-solicitation request is hence sent to suppliers to know the availability and price of the commodity or service to be purchased through Government Electronic Tendering Service and letters of interest giving details of products and suggestions follow suit.

Solicitation Preparation

Entails all the processes involved in the preparation of the documents in the purchase process of goods and service in government entities. The documents are used to request the potential suppliers to provide quotations and bids for their products. The officers involved in the buying process ensure all potential suppliers receive information to have equal chances of being awarded the contract. At this stage, evaluation criteria are carried out and formulated based on procurement standards, rules, performance requirements as well as commercial and legal terms. Solicitation stage goes through different processes.

The first process involves selection of solicitation documents to ensure consistency and streamlines the buying process. The documents include a request for quotation (RFQ), request for proposal (RFP) and invitation to bid (ITB). The next stage involves preparation of the content of the solicitation documents as prescribed in government policies of tendering and bidding. The documents (ITBs and RFPs) are designed in a manner that they capture all the suppliers’ instructions, letter of invitation, terms, and conditions, sample contracts and technical descriptions. On the other hand, RFQ documents suppliers’ requests. Other processes include finalization of the solicitation documents, approval of solicitation documents, distribution and amending of the documents.

In this regard, the draft documents are cross-checked to enhance completeness and consistency in the evaluation of solicitation process. The government then has the mandate to approve the solicitation documents for it to be legally binding. The process is normally carried out to enhance transparency in the government entities. With regard to the distribution of the solicitation documents, procurement officers issue the documents to potential suppliers via email, fax courier or through electronic transmission. For the case of selected suppliers, the documents are solely made confidentially available to the suppliers by shortlisting them through a government portal or website (Balter, 2011). Where necessary, a government entity may decide to give room to the suppliers to make corrections on their documents presented to avoid locking out suppliers in the process of awarding the tender.

Evaluation Process

During the process, the officers in charge of procurement in conjunction with evaluation committee review and evaluate the responses given by the suppliers in the solicitation documents to come up with the best-quoted supplier for the tender. Bids are evaluated technically and financially by both government staff officials or by invited experts. Technical evaluation of the bids involves assessment of the bidder’s information to determine the mandatory criterion while financial evaluation involves the valuation of the financial portions of the bids (McCue, & Gianakis, 2001; Matthews 2005). Evaluation of the bids and use of a checklist in verification of documents need to comply with the set procedures in the bid solicitation process.

The process of evaluation has to be fair, transparent and accurate since it carries a great aspect of integrity and fairness in the buying process by government entities. The best bidder is then selected in regard to the terms of the solicitation and language that was used in the solicitation documents. The government selects bids with the lowest price and those that have high monetary value as well as their abilities to deliver.

Awarding of the Contract / Bid

Awarding contracts entails the process by which the government publically announces the results of the evaluation process highlighting the reason for selection. The suppliers have to review their procurement documents and in the event of any material error, they report the error to the relevant authority. The government entity has to review the whole process of solicitation, evaluation and awarding of the tender before instructing the selected contractor to proceed. In the event of misconduct within the process, a fresh procurement process has to be carried out to enhance a free and transparent way of awarding bids or contacts. The award process goes through the below steps:

Preparation of Award Recommendation Document. The procurement officer drafts an award document that is based on the evaluation report and submits it to the committee to review and approve it accordance to the set terms and conditions of the government. Submission of the Recommendation to the Awarding Committee. Procurement officers review the award recommendation document and later approves it. The review is done in regard to the availability of funds, proper documentation and procurement terms and conditions. The authority has the mandate to accept the award recommendation and approve it. Review by Contracts Committee. A separate committee with the mandate to review the awards carries out this procedure to avoid conflict of interest that might arise during the evaluation process. The committee consists of a chairman and other two senior staff members who are non-voting members of the contracts. A report is then compiled and presented to the procurement officer who reviews the award recommendation and gives guidelines for next plan of action.

Approval of the Award by Awarding Authority. If the award document meets the set rules and regulations, the committee then approves the award and notifies the procurement officer in charge.

Contract Process

It starts with contract administration where contractors and suppliers service performance is monitored with regard to the fulfillment of their contractual obligations. In this regard, planning is done by reviewing the contractor’s performance in the previous years and how they adhere to the terms and conditions. A contract administrator performs the duties of the procuring entity ensuring the suppliers and contractors goods and services meet the required standards as required by the government. The process, therefore, ends when final inspection and acceptance of the goods and services is done by the government.

The suppliers’ performance is then reviewed in regard to previous supplies and a report is made thereafter to determine whether to enter the contact or not. Based on the data parameters, performance is computed and a minimum average score is selected. The government then reviews the supplier’s performance and that contract with the highest score in average are selected. Thereafter, the state accepts the goods and services. In this regard, the government checks the documents such as invoices and other copies of purchase documents and later inspects the delivered goods and services. A Stock Received Report is then compiled and filled by the government for audit purposes.

The government entity then has the mandate to manage the contract where the parties involved in the contract are made to fulfill their respective obligations. In the event of any dispute, the government finds a mechanism to solve the related issue and thereafter the contract is closed out once there are no follow-ups made with regard to purchased goods and service.

Procurement Operation

The report regarding the purchase process is compiled describing the roles and responsibilities of the procurement officers and that of the purchasing authority. More so, it articulates the issues related to minimum training by the government, audit functions, general requirements and procedures followed during the buying process.

Applicable Legislative Requirements, Standards and Codes

Entities involved in government purchasing carry out their activities in an unbiased and fair manner as well as in the best interest of the government. The buyers and suppliers are required to comply with ethical standards and legislative requirements outlined in the purchasing and property treasurer instructions employed by different entities. Some of the instructions include the provision of same information to suppliers during tendering and quotation and ensuring confidentiality of the dealings with the government. Other requirements include identifying and addressing conflicts of interest and undertaking purchasing process based on government policies.

Conclusion

Based on the above analysis, purchasing process in a government entity entails all business procedures followed in the purchase, lease or rental of goods and services. An entity has to be effective, ethical and efficient in purchase process to avoid loses and any audit queries that might arise from the buying process. The process includes need-identification and recognition, pre-solicitation stage, solicitation preparation, evaluation process, awarding of the contract/bid, contract process, and procurement operation.

The government should enforce a centralized procurement division while also empowering chief procurement officers within its entities with procurement authorities of delegation and capabilities to foster ethical, transparent, ethical and responsible processes. Having professional staff in carrying out the purchasing of goods and services for the government aids in maximizing the value of government expenditure and maintaining clear lines of control, accountability, and authority.

Public purchase processing is carried out in compliance with entity’s legislation that fosters open, competitive and accessible procurement process. To enhance procurement process, public entities should employ technology to ensure suppliers, government officers and taxpayers adequately understand the procurement requirements (Balter, 2011).

References

Balter, B. J. (2011). Toward a more agile government: The case for rebooting federal IT procurement. Pub. Cont. LJ, 41, 149.

Florida Department of Management Services (2018). State Purchasing Process. Retrieved from https://www.dms.myflorida.com/business_operations/state_purchasing/vendor_resources/state_purchasing_process.

Husted, C., & Reinecke, N. (2009). Improving public-sector purchasing. McKinsey Quarterly, 4(2), 18-25.

Kovács, A. (2011). Enhancing procurement practices: Comprehensive approach to acquiring complex facilities and projects. Springer Science & Business Media.

Matthews, D. (2005). Strategic procurement in the public sector: A mask for financial and administrative policy. Journal of Public Procurement, 5(3), 388-399.

McCue, C. P., & Gianakis, G. A. (2001). Public purchasing: Who’s minding the store?. Journal of public procurement, 1(1), 71-95.

Preuss, L. (2009). Addressing sustainable development through public procurement: the case of local government. Supply Chain Management: International Journal, 14(3), 213-223.

Thai, K. V. (2001). Public procurement re-examined. Journal of public procurement, 1(1), 9-50.

The Department of Treasury and Finance ((Tasmania)). (2017). Purchasing Principles. Retrieved from http://www.purchasing.tas.gov.au/winning-government-business/how-government-buys/purchasing-overview/purchasing-principles.

The Michigan Municipal League (2015). Handbook for Municipal Officials. Retrieved from https://www.mml.org/pdf/.../publications/ebooks/HMO%20-%20complete%20book.