3 Factors Which Influence the Purchase Power of Government
1. Availability of Funds:
All buyers are constrained by budget. Government buyers, however, are constrained to a much greater degree than industrial buyers. For example, industrial buyers typically do not encounter difficulty in obtaining funds to purchase larger quantities of materials that may be offered unexpectedly at greatly reduced prices.
Corporate funds can usually be acquired and released readily for such advantageous purposes. This is not always the case with government funds. Government buyers operate under a budget which is fixed by a legislative body. To make major changes in government budgets it requires additional legislative action, and getting such action is often impossible.
The introduction of new legislation can be blocked by established priority procedures, or in some cases the legislature may already have recessed. Additionally, because next year’s budget is greatly influenced by the current year’s expenditures, all government agencies routinely make massive year end purchases — some of which are not needed — to protect next year’s budget base.
Because of a strong desire to control public funds, in approving budgets, legislatures often prescribe the precise kinds of materials that can be purchased and the precise ranges of inventories that can be carried.
These restrictions sometimes produce uneconomical situations. For example, the economic order quantity (EOQ) for inventory replacement may be correctly calculated but money may not be available to purchase this quantity. Consequently, higher prices are paid for the more frequently placed small orders.
2. Availability of Efficient Personnel:
The recruitment, training and retention of competent personnel, especially at local levels of government, often pose a major obstacle to increased efficiency in government purchasing. A personnel system which allows political appointees to fill positions such as ‘Director of Procurement’ or ‘Director of Supply Management’ or even as a ‘Purchasing Agent’ certainly does not enhance the professionalism of the purchasing and materials management function.
Even if competent business managers are appointed to these purchasing positions, a person whose tenure is at the sufferance of a political official may have neither the time nor the incentive to do his best. Some steps have been taken to take the politics out of local government purchasing and to alleviate this problem, but much still remains to be accomplished.
Federal government civilian buyers and top supervisors are civil service employees, not political appointees. Moreover, the government utilises career development programmes to encourage young people to become procurement professionals.
For example, the DOD has a comprehensive procurement intern program, for both junior officers and qualified civilians, which develops a reservoir of trained, highly motivated and well paid professionals.
Standardisation programs are generally more effective in government than in industry. Centralised public purchasing necessitates standardisation. The purchasing requirements of government departments can be effectively consolidated only after it is agreed that all departments will use equipment and supplies having the same specifications.
Also, standard specifications are essential for the widespread use of the competitive bid method of purchasing. Without standardisation, the various units of government would inevitably be purchasing different types of equipments and supplies which would result in higher cost of purchasing, inspection, ware- housing and inventory control.
The military departments, under the coordination of department of defence, have also developed large number of standardised specifications for technical military supplies and equipments. These specifications (called MIL specs) describe the essential and technical requirements for numerous military items, materials and services.
MIL specs also include inspection procedures, and they may contain preservation, packaging, packing and marking instructions. In total, there are approximately 34,000 military specifications covering materials in more than 600 supply classes.