City’s purchasing wasting nearly $4M annually

The way The City purchases vehicles, fuels, pharmaceuticals, IT equipment and other commodities continues to waste taxpayer money according to an audit issued Monday by Budget Analyst Harvey Rose.

If The City adhered to the recommendations in the report it would save about $3.7 million annually, Rose said.

“In 2004, the Mayor [Gavin Newsom ] directed the Purchaser to establish a new business model to streamline purchasing functions and increase oversight over the purchasing process,” the report said. “While the Mayor has directed the [Office of Contract Administration] to overseeing the city’s purchasing process through developing purchasing guidelines and standards, updating of the Administrative Code and otherwise streamlining the purchase process, OCA has not fully implemented these directives.”

Among the report’s findings, city departments “do not consistently solicit or document price discounts for departmental blanket agreements less than $50,000, or competitively bid departmental blanket agreements greater than $50,000, as required by OCA’s standards,” the report said. This type of agreement is used to secure approval from OCA for expected purchases of certain commodities during a certain time period and for a certain dollar limit.

The City needs to rethink its method for making purchases, the report said. “Because most city departments purchase the same types of commodities repeatedly (such as computer supplies or tools), most commodity purchases in the city should be obtained through term contracts,” the report said. While 90 percent of vehicles and computers are obtained from term contracts less than 10 percent of tools, including building materials, or transit equipment purchases are obtained from term contracts, the report said.

Last fiscal year, the city issued 38,730 purchase orders totaling $383,550,523. The largest costs were for pharmaceuticals at $39.4 million followed by fuels and lubricants at $25.1 million. Software licensing fees totaled $17.5 million.

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