Technical Corner

Municipal Purchasing (Procurement) – “Why is there never enough time or money to do it right but there is always money and time to do it over”?

February 2022

Old timers will fondly speak about “a person’s handshake being their bond” and that “relationships were forged to last a lifetime”! Last year, I personally had to shakedown four (4) different vendors on items or services that I purchased for myself (nothing to do with our industry) to be treated, in what I thought, is a fair manner post purchase. I do realize that the pandemic has impacted business, and many are trying to both survive and recoup some of their losses, but that can’t be at my expense. My success is based on persistence and the ability to read the fine details and find the right person to appeal to. This got me thinking about how difficult it must be in the frontlines of our industry to navigate significant purchases to ensure value and best return on investment.

It has been a little more than 20-years since I actually managed a small recreation department. I, like so many others in small operations, wore every hat - human resources, health & safety, policy and procedure development and management, customer services and purchasing. It was often my responsibility to do the research, develop a business case and present it to senior management with a recommendation – really all they wanted to know was, did I get three different quotes. Learning to navigate this system to get what I wanted became a skill set. What I usually wanted was what others in the industry had shared during my research. It was basically “you might want to stay away from that and consider this” approach. They had done the field testing and were ready to share their experiences.

I will admit that 1980s and 90s was an interesting purchasing eco system - long before LED lighting there was the light bulb salesperson who showed up at the facility who always had the best deals for the fluorescent tube, mercury vapour or metal halide lights that we were all hooked to. Seems they always had just finished a huge job for a distillery who had been very generous with their product, and they were ready to share this windfall with a manager who made a high-volume purchase. Jackets, meals, sporting event tickets and even “cash back” directly to the facility manager were offered. Today, most operations have some form of a purchasing department or at least a purchasing policy.

Purchasing departments are at the centre of successful supply chain management. Typically, they help other departments identify their needs, manage the requisition process and source competitive prices, and generally act as controllers to ensure adherence to budgets. BUT they will often lack any real understanding of what it is that is being purchased, how long will it last, and that just because “it looks like a duck and sounds like a duck that it may not actually be a duck”. Purchasing departments like round pegs to fit in round holes. This may work when sourcing a purchase of bulk copying paper but not as seamless when investing in equipment or services for a refrigeration or aquatic mechanical room.

The trap is a standard mindset that selecting the lowest price is in the best interest of the operation – it's not always the case. A typical purchasing department functions under a philosophy of trying to achieve immediate savings by choosing a mix of suppliers who can provide the best prices and terms. Again, a system that works well when updating the corporation’s fleet of vehicles but not so simple in our industry, when there are limited suppliers of goods and services for what we need to operate. Beyond the purchase, there is often the installation to consider. Will the install require engineering, permits, government inspection? What health and safety elements must be built into the work? Determining if all suppliers are actually equal in their approaches to these elements will only truly be tested when the contractor lands on site. And when they do, purchasing will not be there to greet them – the facility manager will do that.

Procurement is regularly in the news with scandals at all levels of government – municipal, provincial, and federal that has tarnished reputations and increased scrutiny of the public sector and its vendors.

Entering the landscape are municipal group buying programs which are powerful tool that helps municipalities purchase products and services they regularly use. By combining forces under these procurement groups, municipalities can access high-quality, competitively priced goods and services, while reducing staff time that is often not included in the final cost of investment.

Anytime a “request for proposal” is generated and works its way through the system to have the sealed bids arrive, the immediate response is to flip to the last page where it will state the submitted price for the product and/or service. Pending the size of the purchase, these amounts will be read out loud and formally recorded as public record. The lowest price is almost always selected again, based on the perception of best value for the operation. Trying to select one of the other received higher bids will be a rocky road unless significant investment is made in justifying the choice. I have watched as suppliers have appealed directly to municipal councils to rethink their selection post bid opening or municipal leaders having to deal with community watch dog groups who monitor every aspect of the communities purchasing. Many requests for proposals (RFP) will include protections for buyers such as an “exclusion of liability” clause meant to prevent litigation over lost bids but they may not protect against liability in all circumstances. I am not suggesting that these guards be removed, but rather that there needs to be an education that receiving best value is not always based on a submitted bid. There are many other factors such as cost of ongoing maintenance, life expectancy, ease of operation, energy consumption savings over the life of the purchase and actual warranty of the purchase.

Facility management will inherit the final decision for its entire life expectancy. The wrong purchase will consume vast amounts of staff time dealing with the contractor at installation or operational issues post purchase. A warranty is only as good as the supplier who stands behind it. Don’t get me wrong, I love a deal. However, getting something at a good price that has to be replaced in a short period of time or always seems to be requiring staff or maintenance contractor time is not a deal. Comparing service contractor hourly rates at face value would seem that greed for profit may be driving the difference in rates. What must be considered is that there may be more to it. We cannot ask for Cadillac quality at KIA prices - it's impossible! Higher hourly rates may suggest that the supplier has invested significantly in health and safety training of their frontline workers, they provide work vehicles that are well stocked so that a service person does not need to leave the site to find a part, or they truly do carry adequate insurance for the work they perform. What needs to occur to be successful is having purchasing carefully listen to those who will receive the goods and services in regard to their exact wants and needs so that a balance can be struck.

I regularly watch ORFA members try and navigate the purchasing landscape and can often see their frustration.  Mostly because the purchase is out of their hands, and they know what they are about to get. Purchasing products and services in our business often takes a significant amount of time to both understand what is being sought and what value beyond price is needed. Regrettably, too many members are working in a time warp of “there is never enough time or money to do it right, but there is always money and time to do it over”.

Comments and/or Questions may be directed to Terry Piche, CRFP, CIT and Technical Director, Ontario Recreation Facilities Association

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