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.
STEPS IN THE PURCHASING FUNCTION
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.
A. 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:
- 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.
- The requisition goes to the purchasing agent (PA) who checks on inventory, pricing information, and budgeting code, proper approval and availability of funds (encumbrance).
- Requisitions for which there are unencumbered funds are approved for processing.
- Requisitions for which there are not sufficient unencumbered funds available are returned to the originator who has two options:
- He/she may abandon the request.
- He/she may return the requisition to the purchasing agent, along with a request for a transfer of funds. (Appendix transfer process)
- If the request for transfer of funds is denied, the requisition is returned to the originator along with explanation.
- If the proper authority approves the transfer request, the requisition is resubmitted to the purchasing agent with the approved transfer request.
- The processing resumes as in #2 and #3 above.
- The purchasing agent then reviews pending requisitions to determine whether a formal bid or an informal solicitation is required.
B. 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.
C. 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:
- Items and quantity desired.
- 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.
- A statement as to whether an item-by-item bid, or a total bid, is required.
- When manufactures' catalog numbers are used to describe an article, name and date should identify the catalog.
- 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 ($20,000 effective June 22, 2010), or for
public works $20,000 ($35,000 effective November 12, 2009), 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
The procedure for purchasing under these provisions should include:
- 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.)
- 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.
- Certified checks and bid bonds, if required by the board of education as bid or performance security, should be examined for accuracy and recorded.
- 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:
- Send request for quotations to prospective suppliers or vendors. (See Appendix 10.)
- Receive and tabulate quotations from vendors.
- Check quotations for compliance with requirements, unit price, cash discount, free on board (f.o.b.), and terms.
- 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.
- For purchase orders issued on purchases under
the bid limit:
- The purchasing official signs orders.
- Essential information to be included in the
- Quantity and unit package of the item.
- Description of item or items.
- Quoted price (including delivered free on board (f.o.b.) shipping point).
- Packing and marking instructions.
- Method of shipment: parcel post, express, freight, and truck, cheapest way.
- Place and time of delivery.
- Terms--request that any discounts by reason of payment method be stated (example: cash discount 2% ten days).
- Accounting code(s) for item(s) purchased
- The purchase order should not call for services or conditions beyond those indicated on the quotation sheet and accepted by the vendor.
- 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:
- Compare with sample, if one has been submitted.
- 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.
- 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.
1 Regulations of the Commissioner of Education, Section 170.2(b)
The purchasing agent is the officer who must, because of knowledge of markets and marketing conditions, determine the best sources of supply. It is important to be familiar with the most economical quantities, the best times of the year to buy certain commodities or services, and the total needs of the district's programs. The purchasing agent's duties in the field of procurement are broad, and are outlined in Appendix 1.