The purchasing department of San Francisco: A report of one city’s experience in centralized purchasing

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THE PURCHASING DEPARTMENT OF SAN FRANCISCO-A REPORT OF ONE CITY’S EXPERIENCE IN CENTRALIZED PURCHASING

A Thesis Presented to the School of Public Administration

In Partial Fulfillment of the Requirements for the Degree Master of Arts in Public Administration

by Irwin J. Yarkin August 1950

UMI Number: EP64506

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cit.. p. 16. •^Charter Amendment. 1898. Article II, Chapter IV, November 7, 1922. ■^San Francisco Bill No* 6320, Ordinance No* 5880 (New Series) May 17, 1923.

20 This provided for the standardization of materials; taking at least three bids (excluding certain items) on open market purchases; setting up adequate specifications; advertising on bids over $1000; filing of certified checks on sealed bids; rules for emergency purchases under $25; setting up 15 testing facilities, and so forth. In effect', this ordinance established the procedure which laid the foundation for the centralized purchasing system employed today. Leonard S. Leavy, the first purchasing agent, believed that the purchaser had finally been given control over purchases. Formerly each department of the City and County governments handled its own purchases independently from every other division. Under the present system, no department can buy anything direct. Everything must come through the Purchaser of Supplies by requisition or order; and here the request is filled out of stock, rejected, or ordered by the central o f f i c e . - ^ Savings were quickly realized by the adoption of centralized purchasing.

Through bulk purchases and by

purchasing directly from the factory the city saved as much as 55% on soap, 17$ on flour, 41$ on school chairs and desks, 14$ on coal, etc.-3-^

^Ibid, secs. I-X. •^Ruel McDaniel, ^Putting Business Methods to Work foh City Taxpayers,” Purchasing Agent. 17:897, August, 1928. 17 Loc. cit.

Despite revisionary improvements, dissatisfaction with the Charter of 1898 continued to be widespread.

Agitation

was especially rife in the 1920-1930 period with local newspapers and private organizations, such as the Bureau of Governmental Research and the League of Women Voters, favoring 18 the adoption of a new charter. Some of these groups believed that the Charter of 1898 was created for a small city; that it was old and outdated with many municipal functions not anticipated; that new functions required judicial interpretations and amendments which made the Charter a maze of difficult and contradictory patchwork; and, that since the Charter had been adopted, Improved systems of municipal government had been developed throughout the United States.^ As a result of this opposition a Board of Freeholders, headed by Lewis F. Byington, was elected in 1930 to draft a new charter.

This Charter, in force today, was eventually

submitted and ratified by the People of San Francisco in 1931.^

As far as possible the Charter confined itself to

-^Keesling, 0 0 . cit., p. 11. 19 Harrington and McPhee, op., cit.. p. 11-12. 20 Lewis F. Byington and Oscar Lewis, The History of San Francisco (San Francisco: S. J. Clarke Publishing Co., 1931 1 p 498 -

), , . .

- ...........

22 fundamental rules. consolidated.

Functions common to departments were

This created a governing structure highly

centralized under a strong mayor plan, for it confined the 21 Board of Supervisors to purely legislative functions. A management organization headed by a Chief po Administrative Officer was created. ^ This officer was appointed by the Mayor, and subject to removal only by recall, by not less than a 2/3 vote of all members of the Board of Supervisors based upon written charges and a public hearing. As a result such removals could only occur under the most 23 unusual circumstances. To relieve this officer, as much as possible, from political pressures, the Charter provided that: Except for the purpose of inquiry, the Mayor and the Board of Supervisors shall deal with the admini­ strative service for which the Ohief Administrative Officer is responsible, solely through such officer, and for administrative or other functions for which elective officials or boards or commissions are responsible, solely through the elective official, the board or commission or the chief executive officer of such board or commission concerned. .Except for the purpose of inquiry, each board or commission, in its conduct of administrative affairs under its control, shall deal with such matters solely through its chief executive officer.

21Leavy, op. cit.. p. 14. po — ^Harrington and McPhee, pp. cit., p. 17. 23Special article, “Municipal Primer,11 San Francisco Chronicle, June 29, 1941.

23 Neither the Board of Supervisors, nor its committees, nor any of its members shall dictate, suggest or interfere with appointments, promotions, compensations, disciplinary actions, contracts, requisitions for purchases or other administrative recommendation or actions of the Chief Administrative Officer, or of department heads under the Chief Administrative Officg^, or under the respective boards or commissions . • . . Thus, by making it difficult to remove him, the Chief Administrative Officer was, in effect, given somewhat greater independence in discharging the functions of his office.

Among the nine departments placed under his control

were: the Department of Finance and Records, the Purchasing Department, the Department of Public Works, the Department 2^ of Electricity, etc. Departments whose functions were considered indispensable to a municipality, e.g., police, fire, were placed under the supervision of the Mayor.

The

latter was also made responsible for the executive budget.

26

The Board of Freeholders hoped to combat financial malfeasance by creating a controller1s office to take charge of accounting.

The Controller wa,s made appointive by the

Mayor, but subject to approval by the Board of Supervisors. He was assigned all the powers and duties of the defunct county auditor plus any fiscal administrative duties previously 0 4 ...............--

Charter of the City and County of San Francisco. ......

sec. 22. 25

.....

^Keesling, on. cit.. p. 41.

2^Ibid, p. 42.

.....

. ...

performed by the Board of Supervisors and its finance committee.27

further centralize executive responsibility

such officers as the Tax Collector, Recorder, County Clerk, Public Administrator, and Coroner were also made appointive. With respect to purchasing the new Charter placed the Purchasing Department under the control of the Chief Administrative Officer,^

The Purchaser was appointed by,

and responsible to, the Chief Administrative Officer.

Wo

longer did the Purchaser have to seek the approval of the 30 Board of Supervisors when he rejected any and all bids. According to Leonard Leavy, the former Purchaser of Supplies the greatest advantage derived from the new Charter was the provision that prohibited interference with department heads by those not directly concerned with the activities of the 31 department. The Charter specified the need to ,f. . . standardize materials, supplies, and equipment according to the use to which they are to be put. . . #H32

Formerly, some articles

2^Leavy, loc. cit. ^^Keesling, op. cit., p. 41. 29charter, pp. cit.. sec. 61. 30pOrbes, op,, cit.. p. 315, sec. 4. ^William H. Nonry, ‘'Purchasing in San Francisco: Improved Procedure Under New Charter,1' Tax Digest, 10:237, July, 1932. ^2Charter, pp. cit., sec. 88.

25 were purchased by brand name; now, the Purchaser requires all departments to submit specifications so that he can standardize and buy at the lowest price.^3 The Charter authorized the Purchaser to buy for all city and county departments.

Thus, departments that formerly

made their own purchases (e.g., Department of Public Works) were now established within the Purchasing Department.

At

the same time, the Purchaser was given control over the opera­ tion of the Central Stores and Warehouses.

The shops and

garages, which formerly were independently operated by the departments, were now consolidated and transferred to the supervision of the Purchaser.^ Thus, within the past half century, the Purchasing Department of San Francisco has undergone many changes.

Of

noteworthy importance is the trend away from legislative control of purchases towards an independent agency operating under executive jurisdiction. Purchases under the Charter of I898 were controlled by a Legislative Committee which had neither the time nor the training to devote to the purchasing problems of the community.

Through the years certain ordinances, charter

^-%onry, loc. cit. ^Harrington and McPhee, pp. cit.. p. 23.

26

revisions and amendments instituted new methods in the purchasing procedure.

Finally, a Purchasing Department was

established and given overall control over municipal buying. Purchasing was placed under the executive branch of the government and the department was empowered to standardize specifications, set up testing facilities, advertise for bids, etc.

In other words, the Purchasing Department slowly

evolved to the point where It now has sufficient authority to do an effective job.

CHAPTER IV

ORGANIZATION OF THE PURCHASING DEPARTMENT I.

PURCHASING STAFF

The Charter of 1932 specifically defines the scope and powers of the Purchasing Department.

Section 61 of the

Charter provides that! The Purchasing Department which shall include the functions and personnel of the Bureau of Supplies, the operation of central stores and warehouses, and the operation of central garages and shops, and shall be administered by the Chief Administrative Officer and shall hold office at his pleasure. As can be seen the City of San Francisco placed the Purchaser under the jurisdiction of the Chief Administrative Officer.

It was hoped by this measure to remove the

Purchasing Department from political pressures (e.g., Board of Supervisors control under the Charter of 1 8 9 8 ).

By

making the Purchaser responsible to the Chief Administrative Officer, the latter could appoint a man who would by loyal 2 to the policies of his administration. This trend is followed in other cities.

In a survey made of eighteen

cities, ten made the Purchaser of Supplies directly responsible to the chief executive, five to the department

^Charter of the City and County of San Francisco, as adopted March 26, 1931, sec. 2Russell Forbes, Governmental Purchasing (New York! Harper & Bros., 1929), p. 7*

28

head, and three to a hoard or to the city council.3 According to the Charter the Purchasing Agent of San Francisco buys rtall materials, supplies and equipment of every kind and nature, and enters into agreements for all contractual services required by the several departments and offices of the city and county . . . .

He approves all

major requirements before they are passed to the buying division;

5

he approves the award of all major contracts

and orders; he conducts negotiations on important purchases; he adjusts differences which arise in the performance of contracts, and he maintains close contact with superiors and employees.^

In addition, he formulates the policy for

such matters as budgetary needs, standard specifications, realization of discounts, sale of obsolete equipment, the inspection of purchased goods, and so forth.

^Henry G._ Hodges, City Management. Theory and Practice of Municipal Administration (New York: F. S. Crofts & Co., 1939), p. 204. 4 Charter, pp. pit., sec. 88. 5 Departments which do not follow the regular purchasing procedure first get approval from the Purchaser and then make their purchases. The following items are purchased in this manner; books and periodicals for library departments, works of art for museums, purchases for construction operations, and purchases for any operations outside the City and County of San Francisco. Lop. cit. .^L. F. Boffey and Edward T. G-ushee, Scientific Purchasing (first edition; New York; McG-raw Hill Book Co., 1928), pp. 58-59.

29 In order to do this, the Purchaser must have a wide and varied background in the field of purchasing.

He should

be familiar with market conditions, the quality of commodities, and the sources of supply.

He must have a good knowledge

of the statutes and municipal ordinances regulating purchasing so that he can work within the framework of the law.

The

legal framework should be flexible enough so that the Purchaser can set up the buying procedure to fit his concepts 7

of purchasing.1 In his dealings the Purchaser aids city departments in securing, where possible, better commodities at a lower Q

price than they themselves could secure.

With this aim in

mind the Purchaser must establish good public relations, especially within his own organization.^

He must realize

the importance of good personnel and good organization. Losses, such as shortages, incorrect billings, overcharges, and delivery of inferior material, may result through the

^Russell Forbes, Purchasing Laws for State. County. and City Governments (revised edition; New York: National Association of Purchasing Agents, 1941), p. 29. 8

’

.........

Russell Forbes, The Organization and Administration of a Governmental Purchasing Office (revised edition; New York: National Association of Purchasing Agents, 1941), p. 22. ^Stuart F. Helnritz, Purchasing; (New York: PrenticeHall, Inc., 1947), p. 59.

30 employment of inefficient workers.1^

The Purchasing

Department of San Francisco strives to secure the best personnel available by means of competitive civil service examinations.

Exclusive of the Purchaser every employee

in the department is selected on a competitive basis under the jurisdiction of the San Francisco Personnel Board. In addition, the Purchaser must maintain a cordial relationship with salesmen and vendors, so that he can request favors, such as rush orders and deliveries,11 this does not spell out an easy position.

All

To handle this

job adequately the Purchaser must bring to it extensive training and experience, and great tact and understanding.1^ In the large organization the Purchaser must rely upon an assistant to execute his policies and to supervise the

s t a f f . **-3

The assistant is actively in charge of the

^ R a l p h Currier Davis and Michael J. Jucius, Purchasing and Storing (New York: Alexander Hamilton Institute, 1947), p. 29. ^Interview with Mr. Richard S. Stondr, purchasing agent of San Jose, March 10, 1949. l^The Technique of Municipal Administration (third edition; Chicago: International City Managers* Association, 194?), p. 304. ■^■^Forbes, Governmental Purchasing,

op.

cit.. p. 77.

31 purchasing routine and sees that the same general procedure is followed throughout the department* He acts as a point of contact between the buyers and the purchasing agent and assumes responsibility for the routine of the division, bringing before the purchasing officer all the special problems connected with ordering and follow-up which requires his special attention. Similarly, in San Francisco the Chief Assistant Purchaser supervises the purchase of all materials, supplies and equipment. personnel.

It is he xfho assigns the work and supervises

He is, for example, responsible for the preparation

of contracts and consolidated schedules, the issuance of purchase orders, the checking of invoices, etc.15

The

effectiveness of the department can in no small measure be attributed to the caliber of the man in this office.^ Serving under the Chief Assistant Purchaser in the hierarchy of the organization are the assistant purchasers or buyers.

Generally, the buyer is a specialist who is

selected owing to his familiarity with a given commodity line.

His broad knowledge of the price trends, the markets,

and the available qualities are useful when he interviews

^Boffey and Gushee, loc. cit. -^classification of Duties of Positions, Civil Service Commission, October, 194-7, p. 8. -1/T

....

.. _ ....

........ ...__...

... ... ...... . ... .... .

Forbes, Organization and Administration of a Govern­ mental Purchasing Office, op. cit.. p. 27.

32 salesmen and examines their samples.

As the Purchaser of

Supplies in one field he usually knows the precise needs of the requisitioning departments.^ The thirteen assistant purchasers in the San Francisco Purchasing Department are primarily specialists in one field of purchasing. for the schools. cafeteria buying. primarily.

Two buy all the materials and supplies

A third purchaser does all the school Another buys canned and dry goods products

One specializes in printing and stationary.

Another assistant is in charge of inventory; he also transfers surplus stock interdepartmentally, and effectuates the sale of obsolete equipment. Purchases for the city owned utilities are handled by a separate division within the purchasing department. This division within the department was deemed necessary due to the large volume of purchases made for the public utilities system and the highly specialized type of purchases required.

In charge of this buying unit is a Chief Assistant

Purchaser who is directly responsible to the Purchasing Officer.

Under the Chief Assistant are three assistant

purchasers— two buy for the municipal railway system and the third covers the other utilities, as the airport, water

-yj . ..____ ____ _ __ _________ Forbes, G-overnmental Purchasing, op. cit. . p. 78.

33 department, etc.

All work in close cooperation with the 1A Public Utilities Commission. The whole purchasing procedure, including the clerical staff, is segregated from the rest of the purchasing department, although the procedure is the same as that for other departments.

This is a unique feature

of the San Francisco system; the fact that the purchasing department handles the provisions for the Public Utilities Commission and that this division functions as an entity within the whole department. An assistant purchasing agent is also assigned to the city and county hospital of San Francisco.

Purchases

for this department approximate three-quarter millions a a year. hospital.

This assistant purchaser is stationed at the In addition to purchasing, he is in charge of

several storerooms at this location— a storeroom for linen, one for stationary, several for food, one for janitorial supplies, and a miscellaneous storeroom.

All supplies are

stocked in the respective storerooms and are distributed through an interdepartmental system.

The Finance Department

of the hospital keeps its own records on expenditure and thereby helps the purchasing agent check on his inventory.-*-9

^ M a y G-ardner, "Purchasing Department ” (unpublished report, Coro Foundation, San Francisco, 194-95, report no. 3, January 24, 1949. ^interview with Mr. Charles Snediker, assistant purchasing agent, February 16, 1949.

34

Up to this point, the Purchasing Department has been explained solely in terms of the Purchasing Officer and his immediate staff of assistant purchasers with a short 20 description of their duties and functions. The other divisions within the organization will be described in detail as the paper progresses.

^Infra, Figure 1, The Organization of the Purchasing Department of San Francisco, p. 35.

35 CHIEF ADMINISTRATIVE OFFICER

[CHIEF ASST. PURCHASER! JHIEF ASST. PURCHASER! —

f

i

General Purchasing

Auxiliary Services

Public Utilities jASST. PURCHASERS!

Central Warehouse

Pept.• of Education|

Shops &

[ASST. PURCHASERS] Rail-way! School s] Airport Water, Misc.

Tabulation and Reproduction

Hosoital 4*Au«e^j!HsU^ux.

Public Health Dept. Clerical Staff

Recreation Dept,

r.h

r...n|

Clerical Staff

n iHn.ijn m m .-------------------!*■_.-

4

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