We’ve talked with quite a few procurement officials over the last few years and we know how much time is spent negotiating prices in government-wide contracts. They are established through a competitive bidding process, in which winning vendors are selected to supply a city, county or state with the goods it needs, like reams of paper, chairs, lamps, waste baskets, cars or car parts, and so on.
But even if a contract has been negotiated sensibly, actually implementing it can be tricky.
A March 2017 audit in Atlanta spells out the problems that occur when agency documentation of purchases is poor, contract price lists aren’t updated regularly, and invoices reveal big discrepancies between contract prices and what agencies actually paid for goods they purchased.
We’re not talking about small potatoes. Atlanta spent $43.8 million on its annual commodity contracts in 2016. The audit looked at the city’s 12 largest vendors for these purchases and found that 80 percent of the invoices the audit team sampled showed discrepancies with the contract list price or involved a contract price list that had expired.
One of the problems cited in the audit is poor documentation by agencies. This not only compromises the city’s ability to know that it is getting the best prices, but also impedes its ability to analyze purchases so that it can potentially achieve higher discounts and utilize rebates from vendors. The audit suggests that the city also could achieve potential savings by joining with other governments in cooperative purchasing agreements. Multi-government cooperative contracts increase negotiating power, enabling all the participating governments to get better prices.
About 15 months ago, the Atlanta City Council voted to establish a more centralized procurement system. This reorganization, which is still ongoing, involves moving some agency personnel to the Department of Procurement, and should help fix some of the problems cited in the audit. A technology upgrade is also expected to help as will closer monitoring of invoices and clearer rules both for conducting purchases and documenting them.
The Department of Procurement has agreed to all the recommendations made in the audit. We suspect the recommendations would help many other governments, as well. As the audit reports, “Enforcing contract terms and analyzing spending to leverage buying power can achieve significant savings.”