The Report Is In
June 17, 2016
The city’s Internal Auditor’s report on the Procurement Process is complete and will be presented to the City Commissioners for their approval.
The city of West Palm Beach’s Procurement Department is under the responsibility of the Deputy City Administrator Dorritt Miller, in the procurement of goods, services and construction of the highest quality at the most reasonable cost through fair and open competition. Its primary responsibility includes:
Determining procurement methods
Facilitating solicitations
Monitoring the Small Business Program
Monitoring Consultants Competitive Negotiation Act (CCNA) Procedures
Developing Procurement Policies and Procedures
Number of Purchase Orders Issued:
FY 13/14 FY 14/15
1,871 2,109
Value of Purchase Orders Placed:
FY 13/14 FY 14/15
$77,189,758 $195,934,846
The Procurement Department is responsible for issuing solicitations, conducting/ attending pre-bid and proposal conferences, reviewing responses and facilitating the contract award process. Their primary goal is to ensure a fair and competitive solicitation process. In other words they purchase everything from scratch pads to new police cruisers, and it’s accomplished with a staff of two Purchasing Agents two Senior Purchasing Agents and one Accountant +7 staff members who are responsible for procurement beginning with the planning stages to contract execution.
Completed Solicitations FY 13/14 FY 14/15
Invitation to Bid (ITB) 50 35
Request for Proposals (RFP) 17 10
Request for Quotes (RFQ) 17 7
Quotes (Under $25,000) 27 37
Invitation to Negotiate (ITN) 2 6
Here are examples of what the City Auditor and his staff analyzed, and recommendations for improvement.
Statement of Objectives::
(1) Whether the level of adherence to the Procurement Department’s formal procedures and good business practices are providing adequate management of the City’s procurement function.
(2) Whether the level of adherence to the Procurement Departments formal procedures and business practices is providing the City with reasonable assurance that goods and services are being procured at the lowest cost and ensure the highest quality.
Audit Conclusions and Summary of Findings::
(1) Procurement has opportunities to better comply with the requirements defined in its formal procedures.
(2) Procurement should improve the department’s training, monitoring, and support practices to help ensure proper supporting documentation is maintained and goods and services are procured at the lowest costs/highest quality.
(1) Opportunities for Improvement:
Criteria:
The Procurement Departments formal procedures indicate that the Procurement Department’s responsibilities include coordinating with the user of department’s prior to the issuance of a formal purchase order or contract especially in cases where technical equipment, specifications, plans, or designs are involved.
Cause:
Due to a reduction in personnel over the years, the Procurement Department has not had sufficient staff to keep up with the workload. This resulted in eliminating formal communication efforts with departments. Formal efforts for tracking user and vendor satisfaction have not been high on the department’s list of priorities.
Effect:
Not having adequate communication links with Procurement Department users could result in items not being purchased timely and needed goods and services not being available, or being purchased at a higher price/lower quality than appropriate to meet the user’s needs.
(2) Measuring Cost Savings & Other KPI’S: (Key Performance Indicators)
Criteria:
The Procurement Departments formal procedures indicate that the Procurement Department’s responsibilities include procuring goods, services, and construction that will meet departments requirements at the least cost to the city.
According to the Project Management Institute, there are several KPI for evaluating the procurement function. The following are a few of the most notable KPIs.
1. Managed Spend and Total Spend.
2. Clients Contentment.
3. Lead Time for Procurement
4. Obtaining Feedback from Sellers.
5. Productivity in Purchasing.
Cause:
Because of the magnitude of Procurement issues, some of these requirements have not been addressed.
Effect:
Without these tools, the Department does not have the means to ensure that this requirement is adequately met. If goods and services are not procured at the least cost to the City, it could result in taxpayer dollars not being economically spent.
(3) Supporting Documentation and Purchase Order Processing:
The Internal Auditors reported the following report on a sample of 42 purchase orders processed.
a. Nine (21%) of the purchase orders did not have supporting documentation showing how the city determined that the vendors selected provided the lowest price and best products/services.
b. Two (5%) of the purchase orders had only one price quote. According to formal procedures, three quotes were required on these purchase orders.
c. Three (7%) of the purchase orders did not have complete electronic documentation on file supporting how the City determined that the vendors selected provided the lowest price and best/product.
d. For one purchase order, the Letter of Engagement was signed by the vendor, but did not have the mayor’s signature.
e. One $550.000.00 purchase was for a piggyback contract of an existing State fuel contract. The procurement department did not seek any additional proposals to determine if better terms or pricing were available. See example of “Piggyback” below.
Internal Auditor testing for the proper processing of purchase orders (P.O.) and invoices noted the following
a. Nine (21%) of the purchase orders included charges that were invoiced prior to the date the PO was approved.
b. Procurement could not provide signed/approved versions for 2 (4%) of the P.O.
c. As of 1/26/16, two (5%) of the P.O.’s have not been invoiced. Procurement did not have information on why these purchase orders had not been invoiced. During our audit Procurement was able to determine the reasons for these purchase orders not being invoiced.
d. One P.O. dated 1/13/15, to Duval Ford for police vehicles was not invoiced until November 2015: Procurement did not have information on why this purchase order had not been invoiced. During the audit, Procurement was able to determine the reasons for the ten month delay.
Item C & D have me concerned, especially the new police vehicles. Did the cost escalate in the ten months since purchasing? Why was no explanation provided? Did the City sanitize the auditors report?
Conducting Procurement Seminars:
Criteria:
The Procurement departments formal procedures indicate that the department’s responsibilities include conducting Procurement seminars to aid City personnel in understanding the operations of the Procurement Dept.
Cause:
the Procurement department has a limited workforce. Developing, scheduling and presenting seminars have not had the highest priority.
Effect:
If Procurement seminars are not conducted, it could result in City personnel not being aware of and not following department policy and procedure.
Maintaining the City’s Vendor Database:
The Procurement Department does not have formal written procedures for maintaining the city’s vendor database.
Please see “Demand Star” below.
Criteria:
Procurement Departments formal procedures indicate that the department is responsible for the input and maintenance of the vendor database and supplier list information in Oracle.
Cause:
At one time an individual was tasked with maintaining the vendor database. However, that person left the city, and no one was assigned to take over the day-to-day responsibility. IT also lost the person who maintained the database for the IT Dept. Over time the performance of this task was discontinued.
Effect:
the risk associated with vendor relationships include the facilitation of fraud schemes and/ or poor vendor performance, resulting in taxpayer dollars not being economically spent and managed.
Who is Marcum?
Marcum is the outside auditor with a five year contract to inspect City Records, as mandated by the State of Florida. Marcum’s contract has expired, and the State will not allow any vendor to re-apply, once the five year contract has expired. Smart, a new set of eyes will be used. A new vendor must be found. Each meeting I have attended, a representative from Marcum was also present, and each meeting had a complaint concerning the difficulty in obtaining city records in order to complete an audit.
The Internal Auditing dept. is missing one committee member due to his relocating to another city approximately 6 months ago. The city needs to replace him sooner rather than later. I personally want that extra set of eyes on the city.
The Internal Audit Dept. is short an employee due to her resignation after the birth of her second child.
Mr. Strout mentioned he found a replacement who has relocated to WPB from Nassau County N. Y. where she was the Audit Manager for 30 years. Sounds experienced to me, and hopefully the City Commissioners will not drag their feet in making her an offer.
The Auditors report mentions numerous time the Procurement Dept. is short staffed. I can only imagine the effect it has on employees and the difficulty attempting to keep ahead of the work load.
After the meeting I spoke with Mr. Frank Hayden, the Director of Procurement, and asked him the total number of employees who reported to him. His answer was 12. I then asked how many was needed to have his dept. run efficiently. His answer 15.
This is the dept. that is responsible for millions of dollars for purchasing goods, services and construction.
With the responsibility Mr. Hayden has, why does the Deputy City Administrator, Dorritt Miller deny him the staff needed to do the job?
“Demand Star”
This is a purchasing program recommended to the City. As you read above the City recently ordered new Police Cars. The city advertises in the P.B. Post and letters sent to car dealerships in the area.
Demand Star would reach hundreds of car dealership in Florida while describing exactly what the city needed, and what equipment was to be installed. The city would receive hundreds of bids. A win for the city.
“Piggyback”
The city made a $550.000.00 purchase for a fuel contract, which was piggybacked on a contract of an existing State fuel contract. In other words we paid what the state paid for a gallon of gas. Here’s my objection to “Piggybacking”
First you have to assume the State made the best deal possible.
Now, say I own Sandy’s Shell and I have a fundraiser for Mr. Smith, who is running for political office in Tallahassee. I help raise $300,000.00 for his campaign. He’s elected. The State needs to purchase gas for State auto’s, trucks, State Troopers cars. You know what I’m going to do? I’m going to remind Mr. Smith what I did for him. What are the chances I receive the contract?
I’m beginning to understand why Mayor Muoio refuses to have the Internal Auditors Report televised on Channel 18. What residents don’t know—wont hurt them.