Introduction.................................................................................................................................
Chapter I. Steps in
the Purchasing Function............................................................................... 4
A. Processing
the Requisition.......................................................................................
B. Preparing
Specifications..........................................................................................
C. Requesting
Bids or Quotations.................................................................................
D. Award
of Contract or Issuance of Purchase Order...................................................
E. Follow-up
of Order for Delivery ............................................................................
F. Invoice
from Vendor................................................................................................
G. Receipt
of Goods.....................................................................................................
H. Quality
Control.........................................................................................................
I. Approval
for Payment of Invoice or Claim..............................................................
Chapter II.
Relationship of Purchasing to Other School Functions............................................ 9
A. To
Educational Services..........................................................................................
B. To
Finance Department............................................................................................
C. To
Accounting or Auditing Division........................................................................
D. To
Building or Maintenance Department..................................................................
E. To
Legal Department................................................................................................
Chapter III.
Purchasing Procedures......................................................................................... 12
A. Quality
of Product....................................................................................................
B. Quantity
to be Purchased..........................................................................................
C. Storage
or Stocking of School Supplies and Equipment...........................................
D. Inventory
Records....................................................................................................
E. Salvaging
Materials.................................................................................................
Chapter IV.
Competitive Purchasing........................................................................................ 22
A. Policy Requirements................................................................................................
B. Underlying Principles of Purchasing by
Competitive Bidding.................................
C. Purchases Exceeding the Dollar Limits
Established by Law for
Bidding
Materials, Equipment, or Supplies.............................................................
D. Multi-Year Leases and Installment Purchases..........................................................
E. Multi-Year Service Contracts..................................................................................
Chapter V.
Purchasing Through Agencies Other than Vendors................................................ 32
A. Office
of General Services.......................................................................................
B. Purchase
of Prison-Made Goods..............................................................................
C. Products
Made by the Blind and Disabled...............................................................
D. Participation
in County Contracts.............................................................................
E. Cooperative
Purchasing...........................................................................................
Chapter VI.
Purchasing Forms, Records, and Recommendations............................................ 34
A. Purchasing
Records..................................................................................................
B. Purchasing
Forms.....................................................................................................
C. Purchasing
Tips........................................................................................................
D. Sources
of Purchasing Information...........................................................................
E. Professional
Associations........................................................................................
F. Criteria
for Evaluating Methods of Procurement......................................................
G. Good
Public Relations.............................................................................................
H. Ethics
of Purchasing.................................................................................................
Glossary of
Purchasing Terms................................................................................................. 42
Appendices.............................................................................................................................. 45
Introduction
This handbook has been prepared primarily for the
guidance of the administrator responsible for purchase and supply. Detailed procedures, which have proved their
effectiveness in many school systems, are suggested. Basic principles remain relatively constant, whether the school
district is large or small. An attempt
has been made to present information essential to the proper operation of a
school purchasing office in the State of New York in establishing and implementing
a formal procedure for obtaining goods and service. Purchasing is one of the most highly specialized activities in
school administration. As the person
responsible for the purchasing function one must be aware of laws and
regulations that govern the purchasing system; be knowledgeable of the
purchasing agent's role and duties; and of the buying procedures needed to
carry out the purchasing function. Good
purchasing has been described as securing material or service in the right
quantity and quality, at the right time, and for the right price. The purchasing agent is faced with a
formidable task in seeking to satisfy the criteria of (1) the right quality and
quantity, and (2) the purchase at the lowest possible cost.
Purchasing is a process including receiving, storing,
inventorying, and distributing. It
seeks to obtain maximum value from each educational dollar spent for equipment,
supplies, and contracted services. Wise purchasing practices help upgrade the
quality of programs and control cost. This publication has been prepared for
the school-purchasing agent as a guide for implementing effective purchasing
practices and obtaining optimum product quality.
State law, court decisions, and local school board
policy regulate the school purchasing process.
Competitive bidding legislation adds to the purchasing agent's routine
responsibilities, but it is a judicious protective safeguard. These bidding restrictions need not limit
the purchasing official; rather, board of education policies and routine can be
structured to allow flexibility and professional judgment in procurement, while
at the same time observing statutes that protect the public interests. It
cannot be too strongly stated that a school district or BOCES must perform the
purchasing function in the manner the law prescribes; there is no alternative.
As in other areas of school operation, the board must
adopt carefully formulated and clearly stated policies and regulations for the
conduct of purchasing. These guides
will translate laws into action and will establish the purchasing posture of
the district.
Purchasing must be an integrated function since every
phase of the operations of the school involves the use of supplies, equipment,
and services. The relationship of the
purchasing agent to all other school administrators must be clearly delineated
and understood. Ethical conduct in managing the district's purchasing is an
absolute essential. Each school
district should adopt and strictly enforce a code of ethics to govern practices
in school purchasing.
The board of education shall designate the person to
whom the function of purchasing is delegated.1
A
sample resolution is found in Appendix 2.
The purchasing function is generally considered to cover
the complete supply transaction, beginning with the initiation of a request
(requisition) to supply a certain need and ending with the approval of a claim
for payment.
To ensure internal control, the purchasing function is
centralized in the position of the purchasing agent. A recommended purchasing
procedure, which incorporates nine steps, involved in the purchasing of
supplies and equipment for schools is described below. These are applicable to the smallest unit,
as well as to the largest school system.
Some of the steps may be eliminated, computerized and combined, provided
an adequate system of control remains.
Processing
the Requisition. The user, e.g.,
teacher, principal, custodian, or stockroom clerk, initiates a
requisition. While the procedure should
provide an adequate means (e.g., computerized standard supply lists) by which
each user can make his need known, the number of people who initiate formal
requisitions should be kept to a minimum through the proper timing and grouping
of requests. Processing of requisitions
will be expedited by observing the following rules:
A.
The user prepares the requisition and retains the duplicate copy for
reference. Requisitions may be
computerized and should be numbered and have a letter to designate the
requisitioner, school or department for identification and authorization
purposes.
B.
The requisition goes to the purchasing agent (PA) who checks on
inventory, pricing information, and budgeting code, proper approval and availability
of funds (encumbrance).
C.
Requisitions for which there are unencumbered funds are approved for
processing.
D.
Requisitions for which there are not sufficient unencumbered funds
available are returned to the originator who has two options:
E.
He/she may abandon the request.
F.
He/she may return the requisition to the purchasing agent, along with a
request for a transfer of funds. (Appendix
transfer process)
G.
If the request for transfer of funds is denied, the requisition is
returned to the originator along with explanation.
H.
If the proper authority approves the transfer request, the requisition
is resubmitted to the purchasing agent with the approved transfer request.
I.
The processing resumes as in #2 and #3 above.
J.
The purchasing agent then reviews pending requisitions to determine
whether a formal bid or an informal solicitation is required.
Preparing
Specifications. Before an order is placed, bid solicited, or quotation
requested, the purchasing official must specify what is desired so that
prospective vendors may intelligently bid or quote prices and/or fill orders.
1. Specifications
may be very simple or in considerable detail.
Example: Tape Cellophane
1/2" x 2592" Roll
2. When a brand name is used to identify
the product requested, "equal to or better" products of similar or
superior function, purpose, design, or performance characteristics may be
substituted for the brand name product, unless the purchase is made under a
special board resolution permitting standardization (Section 103, subdivision
5, General Municipal Law). See paragraph on Standardization, Chapter IV.
K.
Requesting Bids or
Quotations. The purpose of
obtaining bids or quotations is to encourage competition in the procurement of
supplies, equipment, and services, which will be paid for from public
funds. It has the further purpose of
discovering what a given item will cost, where it can be obtained, and when
delivery will be made.
1.
The information provided in a request for bid or quotation should cover
at least the following points:
a. Items and quantity desired.
b. Latest date on which bid is to be
returned. A reasonable span of time
between request and return of bid should be provided. General Municipal Law, Section 103, requires at least five days
notice, but ten days to two weeks is recommended.
c. A statement as to whether an
item-by-item bid, or a total bid, is required.
d. When manufactures' catalog numbers are used to describe an article, name
and date should identify the catalog.
e. Packing and delivery instructions and
marking of shipment must be specific.
2. State
law requires requesting bids when an item or a commodity group exceeds the
dollar limits established by General Municipal Law, Section 103. Current dollar
limitations established in law require that all school districts' purchases
involving the procurement of a stated "item" or commodity group which
will necessitate the expenditure of $10,000, or for public works $20,000, in
any given fiscal year shall be advertised and awarded on the basis of formal
bids. The advertising shall take place
in the newspaper(s) designated for that purpose by the board of education. A minimum of five days must elapse between
the first publication of the advertisement and the formal opening and reading
of bids. This law is discussed in
further detail in Chapter IV.
The procedure for
purchasing under these provisions should include:
a.
Proper publication of the advertisement for bids. In addition, a district may send typed
copies of the advertisement to potential suppliers or otherwise call their
attention to the advertisement. (See
sample advertisement, Appendix 4.)
b.
Sealed bids should be received, time-stamped, recorded, and kept in a
safe place until the appointed day and time when they are publicly opened and
read. It is important to note that the law requires sealed bids, shall include
bids submitted in an secured electronic format, if provided for by resolution
of the board of education; however "faxed"
may not be accepted.
c. Certified checks and bid bonds, if
required by the board of education as bid or performance security, should be
examined for accuracy and recorded.
d. Bids should be checked and analyzed for
compliance with specifications and law.
Advice of the board's attorney is often sought concerning the
latter. (See sample specifications and
bid forms, Appendix 5.)
3. Quotations
may be requested on an item or items involving an expenditure that does not
exceed the dollar limits established by law requiring competitive bids.
However, the districts' purchasing policy governs these purchases (GML section
104-b). The PA must review the policy with the board of education annually.
While the basic principles of purchasing apply to all procurement, the
procedure may vary in detail depending on the dollar value of the item
purchased. To go through the same
procedure for a $5 order as for a $1,000 order may result in a waste of both
time and money. The following steps are
recommended in processing quotations:
a. Send request for quotations to
prospective suppliers or vendors. (See Appendix 10.)
c.
Receive and tabulate quotations from vendors.
c. Check quotations for compliance with
requirements, unit price, cash discount, free on board (f.o.b.), and terms.
D. Award of Contract or Issuance of Purchase
Order.
1. A
contract or formal bid (usually for purchases and/or services subject to
provisions of the General Municipal Law) may be awarded by a formal written
contract or by the issuance of a purchase order. In either case, the award should be made to the lowest
responsible bidder meeting specifications.
All action should be by formal resolution of the board of education and
is usually taken after recommendation is made to the chief school officer by
the purchasing official.
Formal contract
documents are not reserved solely for large contracts such as for construction,
but vendors (especially those who do repairs) often require contracts. The board's attorney should approve any
contract document before it is signed.
The designated official, usually the president of the board of education
or the clerk on behalf of the board, signs the contract.
In most cases, school
districts issue a regular purchase order after board award of contract to the
successful bidder(s). The order will
refer to the bid submitted, to the specifications, which will be attached as
part of the contract, and will bear the price or prices indicated by the bidder
in his bid.
2.
For purchase orders issued on purchases under the bid limit:
a.
The purchasing official signs orders.
b.
Essential information to be included in the purchase order:
(1) Quantity and unit package of the item.
(2) Description of item or items.
(3) Quoted price (including delivered free on
board (f.o.b.) shipping point).
(4) Packing and marking instructions.
(5) Method of shipment: parcel post, express,
freight, and truck, cheapest way.
(6) Place and time of delivery.
(7) Terms--request that any discounts by
reason of payment method be stated
(example: cash discount 2% ten days).
(8)
Accounting code(s) for item(s) purchased
c. The purchase order should not call for
services or conditions beyond those indicated on the quotation sheet and
accepted by the vendor.
3. Although
Education Law does make provision for a Petty Cash Fund, it is to be operated
in accordance with regulations established by the Commissioner of
Education. (See Section 170.3 of the
Regulations of the Commissioner of Education.) These regulations limit the amount of the fund by size and type
of district. In addition, they permit
payment from the Petty Cash Fund only under conditions calling for immediate
payment upon delivery. Constant vigilance must be maintained to assure that
regular purchasing procedures are not being circumvented by petty cash
purchases.
E. Follow-Up
on Order for Delivery. The
purchasing official has the responsibility for following up contracts and
orders to expedite delivery. The
urgency for follow-up will depend on circumstances such as the need for items
on a certain date, experience with the vendor, market conditions,
transportation conditions, and nature of the material to be purchased. A definite routine for follow-up on critical
items should be established. The
requisitioner should be kept advised as to the status of the requisition.
F. Invoice
from Vendor. When the invoice is
received from the vendor, the purchasing official should review it to verify
that the price agrees with quotations or contract figures and the terms of the
order, including f.o.b. shipping or delivery point.
G.
Receipt of Goods. Upon receipt, goods should be checked for
condition and for quantity and quality as stated in the purchase order or
contract. This may be accomplished by
having the receiving employee a) sign a packing slip or the receiving copy of
the purchase order and b) forward it to the purchasing official as evidence of
receipt of goods or materials. If only
a partial shipment is received, the purchasing official may wish to prepare a
confirmation order listing the material not shipped. This confirmation order will not only advise the vendor of the
continued desire to secure prompt delivery of the balance of this back order,
but will place a copy of this back order in the file of outstanding orders. The
back order confirmation will replace the original purchase order pulled from
the file of outstanding orders when this original complete purchase order is
attached to the invoice covering the partial shipment and moved up for audit
and payment unless further action is
warranted regarding back orders. For example if the vendor appears not to be
able to fill the order and the district intends to exercise the "buy
against clause" against the vendor. In this instance a partial payment would
not be processed.
The purchasing agent indicates to
the auditor, clerk, or other official entrusted with the processing and payment
of claims that all goods covered by the claim have been received in good
order. This approval of the officer-giving
rise to claim is required of all invoices by Education Law, Section
1724.1. The certification may be placed
on each individual bill or it may appear on the warrant.
H. Quality
Control. The testing of items
received for conformity with specifications and for determination of potential
ways to improve specifications is an important part of purchasing. Some steps that may be used are:
1.
Compare with sample, if one has been submitted.
2.
Apply a specific use test when possible. This means the actual application of the item for the purpose
intended. Example: paper towels can be checked for ability to
dry the hand without disintegrating.
3. Use
a laboratory test if necessary.
Example: paint can be checked
for durability, consistency, spreadability, and colorfast characteristics.
I.
Approval for
Payment of Invoice or Claim. The final step
in the purchasing procedure is the approval of the invoice or claim for
payment, either by the board of education or the internal auditor. As indicated under Section G above, this
must follow notification to the accounting office that the goods covered by the
claim voucher have been received in good condition. Prompt payment of claims can mean taking advantage of discounts,
which should result in substantial savings.
School districts having an auditor (Section 2526 and Section 1709,
subdivision 20-a, Education Law) to approve bills for payment are in a
particularly good position to take advantage of cash discounts. The appointment of an internal claims auditor
is recommended as a step forward in revamping the structure of school business
administration.
In those districts where the payment
of claims must wait for audit and approval by the board of education, special
arrangements may have to be made with vendors in order to take advantage of
discounts. Prompt payment promotes good
relationships with vendors.
The basic steps of good procurement
discussed above are summarized in Appendix 3.
CHAPTER
II
RELATIONSHIP
OF PURCHASING TO OTHER SCHOOL FUNCTIONS
The purchasing procedure does not take place as an
isolated administrative function. The
individual responsible for purchasing must always keep in mind all functions of
the school system and, in larger schools, must work closely with all offices
and departments of the system.
To operate efficiently, the purchasing agent must be
given proper authority and cooperation in his relationships with the
educational and non-teaching staff. The
following are suggested as helping to define this relationship.
1.
Requests for the purchasing agent should make prices and/or repair
service, except in rare instances. In
any case, the purchasing agent through the issuance of a purchase order should
make the final commitment.
2.
Communications with suppliers should be handled by purchasing personnel
salespersons should be discouraged from visiting classrooms, schools, or
departments for the purpose of selling their products. For information on special or technical
items, a school or department should request the visit of sales personnel
through the purchasing department.
3.
The purchasing agent should be in a position to seek advice from
colleagues in matters of common interest.
The purchasing agent should not be expected to be an expert in all
matters. Where desirable on technical matters, the purchasing agent will
coordinate meetings with staff members and supplier For example, other
employees, such as the director of music or the director of physical education,
should be consulted on matters associated with such departments.
The relationship of purchasing to other school functions
is outlined below:
A. To
Educational Services.
1.
Designation of certain items is the responsibility of the instructional
and supervisory staff, and there should be agreement on a standard of quality. Example:
the purchasing agent procures textbooks after adoption of texts by the
board of education.
2. Educational personnel should be
relieved of the details of procurement of supplies and equipment, including
contacting sales personnel.
B. To
Finance Department.
1. For
budget preparation the purchasing department may:
a. Provide computerized standard supply
lists.
b. Provide purchasing calendar, market
information and estimated prices.
2. For
budget control, cooperation is essential before purchases are made and funds
encumbered.
a. The right time to purchase, from a
market standpoint, may be built into the purchasing calendar to insure budget
cycle provides the available school funds.
b. The finance department should be
alerted concerning extraordinarily large commitments.
c. Allocation of funds is necessary prior
to purchasing. Sufficient unencumbered
balances must be available or adequate transfers of funds arranged.
d. Correct coding of purchases is
necessary in order to charge each item to the proper account.
C. To
Accounting or Auditing Division.
Prior to payment, the responsible official should check the following:
1. The
receiver and the purchasing official have properly approved packing slip or
duplicate copy of invoice. Any
adjustments for breakage and shortage are shown.
2. Invoice has been compared with purchase
order and any back orders and action to betaken noted
3. Available discounts are shown and
taken, i.e., quantity or cash discounts.
4. Recommended accounting classification
is indicated.
D. To Building or Maintenance Department
1. Prior
approval of this department should be obtained for equipment requiring utility
service or attachment to buildings.
2. Approval
with reference to the safety factor of equipment to be procured should also be
cleared with this unit. Some of the
important considerations to check are:
a. Potential danger to user. (Electrical equipment may be dangerous
unless properly shielded.)
b. Fire hazard. (Underwriters approval is desirable on much equipment.)
c. Danger of splinters from wood and from
sharp edges on metal.
E. To
District's Legal Advisor.
1. Purchasing
within scope of statutes and regulations may require legal counsel.
2. Approval
of contract and other forms should be required.
3. Advice
in connection with acceptance of bids may be necessary.
4.
The matter of proper security (certified check, performance, payment
and bid bonds) may be cleared with legal advisor.
5. Decision
as to when informalities on formal bids may be waived is a matter for legal
counsel.
6. Advice
of counsel may be desirable prior to the purchasing official's recommendation
to the board of education for rejection of the low bidder and/or an award of
contract.
7. The
approval of the form of any contract should rest with the legal department.
8. Interpretation
of the following laws and regulations affecting purchasing may be necessary:
a. Advertising law--General Municipal Law,
Section 103.
b. Commissioner's Regulations governing
transportation.
c. Department of Transportation
Regulations governing transportation.
d. Minimum wage law (on public works
contracts).
e. Child labor law.
f. School bus purchase (Education Law,
Sections 3602 and 3623; Local Finance Law, Sections 32.00 and 33.00).
g. Local school district policy.
9. School
districts as governmental subdivisions are tax exempt. Taxes included on a vendor's invoice should
be deducted before payment.
10. The
right to reject all bids for valid cause
is reserved to the board of education.
Also reserved is the right to reject, for cause, any bid in whole
or in part, to waive technical defects, qualifications, irregularities, and
omissions if in its judgment the best interests of the district will be
served. Also reserved is the right to
reject bids and to purchase items on State Contract or County or adjoining
county Contract, if such items can be obtained on the same terms, conditions,
specifications, and at a lower price.
(County Contracts, General Municipal Law, Section 103, subdivision 3,
and State Contracts, General Municipal Law, Section 104.)
CHAPTER
III
PURCHASING
PROCEDURES