By Sebastian Kanally, Times Chronicle
Monumental changes are coming to RDOS purchasing which will turn the current system that has ruled for 60 years on its head.
At their June 13 board meeting, the Regional District of the Okanagan-Similkameen (RDOS) decided to change their purchasing policy to a centralized system, instead of the decentralized system that has been in practice since the beginning of the organization in the 1960’s.
Mike Ummenhofer, the new purchasing procurement manager for the RDOS presented the new model to the board of directors, noting that “certainly what I am proposing here is quite different from the model that you have been using.”
It is actually “the opposite of what the RDOS has been doing” and went so far as to call the changes “monumental”.
The new system will be a centralized procurement system, where all purchases over $3,500 will be funnelled down into one department.
Ummenhofer explained that the decentralized system the RDOS has been using may have worked effectively when the RDOS first started out with smaller budgets, but noted “any organization that I know of that spends the amount of money we are spending here really uses a centralized system.”
He explained that having a decentralized purchasing system means that departments can approve and make their own purchases. This is what the RDOS wants to get away from as it produces a lack of controls when the approvers are also the buyers, it is also inconsistent because each department is doing something different, using different contracts, tender documents, procedures etc.
The decentralized system also creates wasteful practices and duplication. In his presentation to the board, Ummenhofer explained that three different departments issued three separate Requests for Quotes (RFQs) to purchase three pickup trucks before the meeting.
The new centralized system will address this needless redundancy by dividing the approvers from the buyers and requiring any purchases over $3,500 to go through the purchasing department.
This new centralized model will allow for better purchasing decisions, improved transparency, reporting, management and audit trails, and lower costs associated with training and supporting additional staff, among other benefits the report notes.
This centralized approach, it was noted, emphasizes the division of duties so that no one person or department has total control over procurement.
The board still sets the budget, the managers approve their own projects, the procurement manager buys the goods and services, which the department manager has approved and the accounts payable clerk pays the associated bills.
“This is a good division of duties and virtually eliminates any risk of collusion or other unwarranted behaviour”, the report explains.
In addition to centralizing the purchasing at the RDOS, the other big change to the policy that was approved is increasing the approval limits.
As it currently stands, any budgeted project that is over $150,000 requires the board of directors to assemble and re-approve the project, despite it already being approved in the budget.
The board needs to reassemble because the current policy limits the chief administrative officer’s (CAO’s) authority to approve purchases at $150,000. This change will see this limit increased “so the organization can run more efficiently”.
This duplication of process, where the already approved budget projects need to be approved again by the board of directors “creates no value” Ummenhofer noted, and it hinders the process. The current policy results in budget-approved projects getting stuck at the budget stage.
The RDOS report notes that increasing the approval and buying limits for staff “will in no way diminish the Board’s control over spending” because nothing can be purchased unless the item is first identified in the budget. The board determines what is purchased and how much is to be spent, and staff follow those instructions.
