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City adopts streamlined purchasing policy

(Sept. 12, 2014) City Council will soon be dropping many of its biggest meeting time-fillers – public bid openings – under a new revision to the town’s purchasing and procurement policy, adopted this week.

Amongst other things, the revised measure will see all vendor bids of less than $100,000 in value be handled within the city’s Purchasing Division and not by the council itself – which currently solicits sealed bids and conducts public openings for everything over $25,000.

Although council seemed fine with backing off on its bid-opening responsibilities – which are probably better described as “bathroom break opportunities” during most weekly sessions – there was considerably more consternation about the pitch to raise the limit on staff purchasing cards.

“We’re not so big that we can’t control it, but there may be some instances where discretion is not utilized in the way we want it to be,” said Councilman Dennis Dare. “There are trade-offs.”

Ultimately, council approved the measure that would give staff the ability to make purchases of up to $10,000 using city credit cards – but with the added caveat that the city’s Internal Auditor will conduct quarterly reviews.

The goal of the policy revisions, according to city Purchasing Director Catrice Parsons, was two-fold. Firstly, the revised manual provides a common standard for the city’s various elements in terms of processing and evaluating bids.

“We have departments that are doing a lot of these steps already, but they’re doing it independently,” Parsons said. “Not that anybody does anything wrong, but one department may do something different than another. What this manual does is provide consistency across the organization.”

For instance, the revised purchasing manual now spells out the methodology for “best value” purchases and how quality should be weighed against cost for any given scenario. It also strictly defines several categories of contract, and how each should be handled.

“A lot of these things had been done by our departments, but had never been put in writing,” said city Finance Administrator Martha Bennett.

Secondly, the new policy attempts to reduce the volume of administrative costs associated with small purchases.

Previously, any purchase over $500, but under the $25,000 threshold for sealed bids received by council, was still required to have quotes from at least three vendors filed with the Purchasing Department before a check could be written. But for many routine buys, this is unnecessary and actually counterproductive, it was argued.

“It’s not cost-effective to take the time to get quotes,” Bennett said. “We’re using an extremely high amount of administrative oversight and time for very small-dollar purchases.”

Instead, the new policy will allow purchases up to $1,000 to be done over-the-counter without competitive pricing. Bids over $1,000 will still be required to file price quotes – but all purchases of up to $10,000 can now be put on city cards, instead of having to have a purchase order approved and a check written.

“Instead of writing hundreds of small checks to vendors, the Finance Department will be able to pay one check per month to our credit card company,” Bennett said.

Although this seems like a considerable jump, Parsons noted that the purchasing cards are actually more easily track-able.

“We’re putting the p-card system in the AS400 [the city’s accounting server] so that everyone can go in and see what has been charged and what for,” she said.

Bennett noted that items under $10,000 comprise 98 percent, by volume, of the city’s invoices, most of which acquire multiple layers of approval from the department level up to City Manager David Recor. But these items under $10,000 only comprise 25 percent of the city’s total expenditure by dollar amount.

“That’s six or seven steps every time someone touches that [invoice], which is what we call a ‘soft cost,’” Parsons said.

“I’ve always thought a lot of [the policy] was redundant,” said Councilman Joe Mitrecic.

But he also noted that using credit cards, rather than having a purchase order reviewed by the city’s budget office, could lead employees to buy things that they think are within their scope but which may cause accounting issues.

“Some of them may think an item is in the budget and use their p-card to purchase that item unknowingly,” Mitrecic said.

“The difference is that currently, if you use a purchase order, the budget is reviewed to make sure the money is there,” Dare agreed. “The budget can go in an re-allocate to make room…but at the end of the fiscal year, if you had overages and people are still out there buying items under $10,000 with their card, you’re going to have difficulty.”

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