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Eleventh Annual Report of the Purchasing Commission January 1st, 1953, to December 31st, 1953 British Columbia. Legislative Assembly 1954

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 PROVINCE OF BRITISH COLUMBIA
Eleventh Annual Report of the
Purchasing Commission
January 1st, 1953, to December 31st, 1953
VICTORIA, B.C.
Printed by Don McDiarmid, Printer to the Queen's Most Excellent Majesty
1954  Victoria, B.C., February 16th, 1954.
To His Honour Clarence Wallace, C.B.E.,
Lieutenant-Governor of the Province of British Columbia.
May it please Your Honour:
Herewith I beg respectfully to submit the Annual Report of the Purchasing Commission of the Department of Finance for the period January 1st, 1953, to December
31st, 1953.
W. A. C. BENNETT,
Minister of Finance.
The Honourable W. A.C. Bennett,
Minister of Finance, Victoria, B.C.
Sir,—We have the honour to submit the Eleventh Annual Report of the Purchasing
Commission, covering the period January 1st, 1953, to December 31st, 1953.
R. H. SPECK,
Chairman.
R. M. BURNS,
Member.
C. D. CAMPBELL,
Member.  Eleventh Annual Report of the Purchasing Commission
For the Year Ended December 31st, 1953
In the four years that the presently constituted Commission has held office, there
have been many changes in the methods and procedures followed. Every effort has been
made to meet the requirements of the operating departments in the most economic manner.
In addition, it has been the policy to expedite, in every way, payment for goods received.
During the past year, only one major change in procedure has been undertaken.
By this the buying activities of the Queen's Printer have been brought in line with those
of the Commission. As a buying organization already existed in that department, it was
felt that the Commission's aims might be as well achieved by standardization of procedures
as by actual absorption, particularly in view of the specialized work involved. The
change, while only in effect since August, 1953, has met with gratifying success. Considerable attention has been paid to standardization of materials, and this has been
achieved with regard to such items as carbon paper, typewriter ribbons, and adding-
machine ribbons. Both the Commission and the Queen's Printer are well satisfied with
the results to date.
BUYING OPERATIONS
While the actual buying functions have remained unchanged in principle, they have
not been static in operation. The ultimate purpose of any purchasing body is to obtain
the most suitable products at the most favourable prices. This involves a great deal more
than the mere process of issuing a purchase order. Several factors must be considered
to achieve the most satisfactory results:—
(1) The operating department must prepare a requisition in the most accurate
and descriptive form possible for the guidance of the buyer.
(2) Quotations must be obtained from all available and appropriate sources.
(3) Offers or tenders must be considered in the light of price, quality, specification requirements, delivery terms, reliability of the supplier, place of
manufacture, and any other pertinent and related factors.
Preferences of the operating departments must be considered as a factor
in final selection.
Check must be made with the operating departments that goods supplied
are actually in accordance with specifications, and that other contractual
terms have been met.   In some cases the Commission undertakes to have
physical or laboratory tests made to determine suitability.
Delivery must be expedited as required.
Invoices must be approved as being in accordance with the terms of the
purchase order, and in some departments the voucher prepared for payment.
In some cases these factors require but routine attention, but in many, particularly
where large sums of money are involved, the complications can be very real. Most
difficulties will arise in connection with items (1), (3), (4), and (5), the obtaining of
quotations, the expediting of delivery, and the approving for payment generally being of
a more routine nature.
To deal with each factor in turn:—
(1) Much time has been spent by the staff members of the Commission on
the question of specifications, and every effort has been made to lay down
standards for use by the departments.    Considerable progress has been
(4)
(5)
(6)
(7) KK 6 BRITISH COLUMBIA
made in certain products, particularly paint, textiles, fuel, and certain
items of mechanical and electrical equipment, but much remains to be
accomplished. The Commission is endeavouring to eliminate the use of
brand names or manufacturers' codes in departmental requisitioning, but
as in many cases no other standards exist, accomplishment is of necessity
slow. The buyers must always contend with the fact, and give it due
deference, that many operating officials are most familiar with one or more
particular brands or types and tend to concentrate on them in requisitioning. This question is not easy of solution and is having our continued
attention.
(2) It has always been the policy of the Commission to obtain quotations from
as widely diversified sources as is economically feasible. While this policy
in many instances results in increased operating costs and trouble with
suppliers often quoting who cannot meet the requirements, it is felt that,
as a public body, buying should be over as wide a field as possible without
fear or favour.
(3) Presumably under the ideal situation it would be possible to buy on a
price basis alone, but under present conditions, failing exact methods of
definition of requirements and exact standards of performance, the buyer
must rely on his analysis of several factors, and in this lies one of his
principal functions. He must be satisfied, among other things, of the
quality of the product, that the delivery terms are satisfactory, and that it
is in line with specifications or requirements. The reliability of the supplier is a very important consideration, for there is often an intangible
value in this which more than compensates for small price variants. This
is particularly true in the implementation of warrants and guarantees,
service and parts supply. One further point in selection concerns the
place of manufacture of the product, a factor not always easy to define or
clearly discernible. While, as aforesaid, the prime aim of the Commission
is to secure the best value for the public money, it would be short-sighted
not to give some recognition to British Columbia manufacturers, who,
as taxpayers and employers, contribute so much to the welfare of the
Province. It is most difficult to set a hard and fast rule for this, but after
full consideration of all factors, this Commission originally set and has
maintained a preference of 10 per cent for all goods manufactured within
the Province, in accordance with section 9 of the " Purchasing Commission
Act." Further, so that the smaller local dealer may be in a better position
to compete with large wholesalers, a 5-per-cent preference is given to
those dealers who are located in the local area where the goods are
required. This whole problem is a source of some concern to the Commission from time to time, and it is felt that the words of the 1952 Report
can well be repeated here: " While this policy is sound, it should not be
forgotten that it is a form of subsidization at the public expense and as
such must be carefully controlled."
(4) While the Commission must accept full responsibility for any purchase
order that is issued, it is a fact that must be accepted that individual officials
have distinct personal preferences, founded on known experience, which
cannot be denned in a written document. While this must not be allowed
to affect unduly the buyers' decisions, such preferences must be given full
weight, for in most cases the respect of the user is necessary in the proper
utilization of any product. This is particularly true when dealing with
mechanical equipment. REPORT OF THE PURCHASING COMMISSION
KK 7
(5) All the care devoted to buying is of no avail if care is not taken to see
that goods supplied are in accordance with the requirements of the purchase order. While this is primarily the responsibility of the operating
department, the Commission must keep constantly in touch and provide,
if necessary, the facilities for testing. Further, if violation of the order's
conditions occurs, steps must be taken to impose the appropriate penalties.
In the past year further action has been taken to provide the necessary
tests, and these have been put into use for fabrics, paints, soaps, and antifreeze on a laboratory basis, while actual " use " tests have been carried
out for a variety of products.
(6) In many cases an important requirement is delivery by a required date.
Any savings in purchase price can be rapidly dissipated if a job is held
up for lack of essential supplies. While enforcement of delivery is dependent upon departmental information and co-operation, the Commission
always does everything in its power to see that the conditions of delivery
as laid down are fulfilled.
(7) One function undertaken by the Commission which is not strictly in
accordance with the duties set out in the " Purchasing Commission Act"
is the vouchering of invoices for goods received by all but the three largest
operating departments—Lands and Forests, Health and Welfare, and
Public Works. Internal accounting requirements precluded standardization as far as these departments were concerned. While an extra burden
is placed upon the clerical organization, it is generally agreed that by this
means the payment of accounts is hastened. Normally an invoice is
vouchered for payment within forty-eight hours. In those departments
where this vouchering is still carried out, the Commission must nevertheless approve the payment as being in accordance with the purchase order
before a cheque can be issued by the Controlling and Audit Branch.
Under normal conditions this is also done within forty-eight hours of
receipt of the invoice from the department.
An attempt has been made here to outline some of the complexities of purchasing in
the very competitive conditions that now exist. The tendency of some operating officials
is to feel that it is a routine operation that could better be performed on an individual
level. If only through the very complexities of the modern business world, this idea will
not bear examination. When we add the various ancillary responsibilities, the need of
a central purchasing bureau becomes self-evident. Given the co-operation of the operating
departments, and by and large this is received in a most gratifying manner, a better job
can be done in the economic utilization of public funds by this specialization. This is a
generally accepted principle, not only in government, but in business as well.
INVENTORY AND STORES
Among the other statutory responsibilities of the Commission is the control of
inventories and stores throughout the Provincial Government's establishments. Considerable progress has been made in the past year, and a proper perpetual inventory provided for office furniture and equipment. Assistance has been given to institutions in
setting up and improving systems, and checks on methods followed have been made from
time to time. Much remains to be done, particularly in the small stores and in departmental office storekeeping where lack of proper control is often noticeable. This is a
long-term project and has the constant attention of the small staff available for this work.
Langford warehouse has been maintained on its customary basis as a supply depot
for seasonal stores, such as those required in outfitting camps and other field parties.
Items which can profitably be bought in bulk for ultimate distribution are also carried. KK 8
BRITISH COLUMBIA
The staff has been reduced through system improvements and the transfer of billing
activities to the Victoria office. It is not the policy of the Commission to operate general
warehouses, but Langford meets a special need, and its continued existence, in the opinion
of the Commission and the departments which it serves, is entirely justified. In 1952-53
the warehouse operated at a profit of about $6,000 on a turnover of $225,000, which is
considered satisfactory in view of the fact that it is intended to strike, as near as possible,
a balance between cost and selling price.
BUSINESS-MACHINE SERVICE
The Business-machine Division has continued to improve its services, and its advice
is available to all departments to aid in determining the type of equipment best fitted to
the needs. The programme of modernization of equipment in line with economy and
efficiency has been carried out, and generally all offices, including those in the field which
have sometimes been neglected in the past, have been adequately cared for within the
limits of the resources available.
PRICES AND SUPPLIES
The levelling in prices, which first became evident in 1952, has continued. While
prices of raw materials have declined, in some cases quite sharply, no great evidence of
this has been seen in the costs of finished products, largely, it is believed, due to higher
labour and transportation charges, along with the continuation of consumer demand at a
high level. Food prices have been fairly stable, with some notable exceptions. Beef
prices have fallen, and milk has been obtained at about 10 per cent less on contracts
negotiated since partial decontrol was undertaken; however, tea and coffee prices have
risen substantially, especially in the last few weeks of the year. While typewriters took
an unexpected rise in price, generally prices of office furniture and equipment have
remained at about the same level. Under increasingly competitive conditions, we have
secured better prices in many instances in equipment and machinery, and automobile and
truck prices have been consistently lower under these circumstances. Hardware, electrical goods, and construction materials have not changed materially in price, although
some softening in lumber has occurred. Petroleum prices increased during the year to
a small extent, but a reversal of this is hoped for in the near future.
Prospects for 1954 are not altogether clear. It would seem likely that, failing international complications, we may look forward to an even stronger buyers' market, with
most products in good supply. Some price softenings appear likely as competition
increases, although the constant upward trend of labour costs is something that must
always be taken into consideration in any calculations in this field. The continuing
strength of the Canadian dollar should be a factor in better prices for imported products,
particularly in machinery and equipment lines brought in from the United States.
STAFF
While faced with a rather large turnover of staff in the junior ranks, the Commission
has been able, nevertheless, to perform its functions as required. Every endeavour has
been made to minimize the effects of this turnover by rotating work responsibilities. This
not only enables staff resignations to be met with without loss of efficiency, but it does
much to relieve the monotony of routine jobs, a large factor in the constant turnover
among junior clerical employees. Nevertheless, the load becomes heavier on the more
senior employees, and the Commission is fully appreciative of their loyal efforts under
difficult circumstances. Particular mention must be made of the buyers who, in an
exeremely competitive market, have been faced with many problems. The Chief Clerk
and the Purchasing and Stores Co-ordinator also merit particular appreciation. REPORT OF THE PURCHASING COMMISSION
KK 9
STATISTICAL RECORDS
Statistical records have been maintained in the present year, as follows:—
A. Competitive.—Purchases from manufacturers and wholesalers which are
placed on a basis of competitive quotes on prices, including those
purchases made on the basis of information obtained from unit price
cards.
B. Restricted.—Purchases from manufacturers or wholesalers for which unit
prices are fixed, or where for some special conditions of source of
supply the buyer is limited to one supplier.
C. Retail.—All purchases from retail establishments, including retail emergency
purchases.
D. Wholesale Emergency.—Orders placed with a wholesaler or manufacturer
by means of emergency purchase order.
Comparative figures for the fiscal years 1951-52 and 1952-53 with figures for the
first nine months of the 1953-54 fiscal year are set forth hereunder:—
1951-
-52
1952-
53
Apr. 1, 1953, to
Dec. 31, 1953
Value
Per Cent
Value
Per Cent
Value
Per Cent
A. Competitive   	
B. Restricted 	
C. Retail                     	
$7,932,525
2,917,961
377,385
516,787
67.6
24.8
3.2
4.4
$13,614,034
1,572,102
481,037
755,173
82.9
9.6
3.0
4.5
$9,053,705
878,177
398,311
469,258
83.9
8.1
3.7
4.3
Totals	
$11,744,658!  |      	
$16,422,346    |      	
$10,799,451    |      	
42,805
40,601
1
32,261
1 A total of $3,018,789 in purchases was classified under the old system of classification (see previous Reports).
This makes a total for the year 1951-52 of $14,763,447. The number of purchase orders issued (42,805) covers this
total figure.
While more competitive conditions (as in milk, petroleum products, etc.) have had
an effect in increasing the purchases under Class A, it is an indication of the success of
the Commission's efforts that an ever-increasing number of orders are issued on a competitive basis. While there is no doubt that this is administratively more expensive than
alternative methods of placing orders, the saving in public funds far more than compensates for any increased cost.
VICTORIA, B.C.
Printed by Don McDiarmid, Printer to the Queen's Most Excellent Majesty
250-254-7759   

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