FRACTECES AND TRENDS EN PURCHASENG [HETRU'CUONAL SUPPLIES W fxéiCl-‘HGIAN WifiLK SGHQGL DES-INCH Thesis fee flu; Dogma «if pit. D. WCEEGAR STATE WEVEBSETY Charies William Rhodes 1964 THESIS This is to certify that the thesis entitled PRACTICES AND TRENDS IN PURCHASING INSTRUCTIONAL SUPPLIES BY MICHIGAN PUBLIC SCHOOL DISTRICTS presented by Charles Will iam Rhodes has been accepted towards fulfillment of the requirements for Ph.D. degree in Education Major professor Date 9174’? Z; /7é‘7{ 7 / 0-169 __ LIBRA R 1/ Michigan State University ABSTRACT PRACTICES AND TRENDS IN PURCHASING INSTRUCTIONAL SUPPLIES BY MICHIGAN PUBLIC SCHOOL DISTRICTS by Charles William Rhodes The Problem The purposes of this study were to determine current purchas- ing practices in Michigan public school districts, and to compare them with recognized criteria. Method and Procedures Four areas relating to purchasing were identified: general considerations in determining needs, establishing quality standards, selection of sources of supply, and bidding procedures. Cooperative purchasing was included as an additional category, but only to deter- mine the extent of its practice. A.review of literature and research was conducted, and the legal aspects of purchasing were examined for a validating background. Following this, a thirty-seven item questionnaire was prepared which covered related purchasing practices. Responses were solicited from.the 604‘Michigan public school districts having a superintendent. A brief questionnaire was also used with 'superintendents of the seventy~seven intermediate school districts, to determine their purchasing role, as well as their degree of parti— cipation in cooperative purchasing. Charles William.Rhodes From recommendations of the Association of School Business Officials and other authorities, a set of criteria was prepared. The actual practices were then compared with these recommended. School districts were divided into seven size categories and the responses were recorded graphically by percentages for each group. thor Findings Based on an 80.3 per cent response, it was found that in a majority of the districts the following conditions prevail: There are no written purchasing policies; administration determines what supplies are to be used and prepares the specifications; fees are charged for workbooks and laboratory materials; petty cash is used for small purchases; cata- logs and the suggestions of users are the primary sources of specifi- cations; supplies are standardized; local vendors receive preference; a list of qualified vendors is maintained; a bidding record is kept of each vendor; competitive bidding is the major means of purchase; quotations are most commonly solicited by letters to vendors; purchase orders are issued for all purchases; written bid invitations go to at least three vendors and include a statement giving the board rejection rights; one- fourth of the districts participate in cooperative purchasing. A majority of the school districts employ 46.7 per cent of the recommended practices. 0f the intermediate district superintendents, 64.1 per cent per— ceive themselves as consultants. .Seventy per cent do no purchasing for their primary districts. Charles William.Rhodes Conclusions and Recommendations The major conclusions are: 1. Individual practices may be identified with district size or with local policy and administrative organization. 2. In the absence of legal clarification, local boards have assumed the initiative in delegating authority and in charging for pupil materials. 3. Substantial losses are resulting from failure to take prompt advantage of discounts offered. 4. Cooperative purchasing remains a controversial subject, with little being done to confirm or disprove its merits. Based on the findings and conclusions, the following recommenda~ tions are made: 1. More background and guidance are needed for purchasing per- sonnel. Suggested means of achieving this include liaison and help from the intermediate and state offices, and provisions for pre-service and in-service education. 2. 'More initiative should be taken at the intermediate level to provide purchasing leadership, including cooperative purchasing. 3. Contributions from the Michigan Department of Public In- struction are needed. This could include purchasing research, pre- paration of a purchasing handbook, and clarification of existing statutes . Charles William Rhodes 4. Since the major responsibility remains with the local dis- trict, the following are suggested as areas for improvement of pur- chasing practice: a. Emphasis on providing written purchasing policies as a basis for sound practices. b. Liberalizing administrative authority to purchase. c. Extension of modern accounting methods. d. Preparation of a purchasing manual for employees. e. Exploration of the possibilities of cooperative pur- chasing. Copyright by CHARLES WILLIAM RHODES 1965 PRACTICES AND TRENDS IN PURCHASING INSTRUCTIONAL SUPPLIES BY MICHIGAN PUBLIC SCHOOL DISTRICTS By Charles William Rhodes A THESIS ‘Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY COLLEGE OF EDUCATION 1964 r: ,3 “UK ACKNOWLEDGEMENTS Deep appreciation is due Dr. William.H. Roe, chairman of the doctoral committee, for his wise counsel and assistance, and to com, mittee members Dr. Julius E. Barbour, Dr. Cole S. Brembeck, and Dr. Edward W} Smykay, for their help during the course of the study. The author is especially grateful to Alexander J. Kloster, Deputy Superintendent, Administration,‘Michigan Department of Public Instruc- tion. His numerous contributions and insights qualify him as the co- author. Thanks are extended to the following officials for their con- Structive criticisms: H, Spilman Burns, Director, Business Services, Baltimore, Maryland, Public Schools; Dr. WilliauiJ..Emerson, Superin- tendent, Oakland Intermediate School District; Dr. Charles W} Foster, Executive Secretary, Association of School Business Officials; and Robert K. Smiley, Assistant Superintendent, East Detroit Public Schools, Finally, appreciation is expressed for the encouragement of my wife, Irene, our friend, Mable Cliff, and my father, Charles F. Rhodes. ii TABLE or conrsh'xs ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . LIST OF mm 0 O O O C C O O O O O O O O I C O 0 LIST OF FIGURE. 0 O O O O O O O O O O O O O O O - I LIST'OF APPENDICES . . . . . . . . . . . . . . . . Chapter I. II. I N TROD UC TION O O O O I O O O O O O O O O 0 Background of the Study. . . . . . . . . Statement of the Problem . . . . . . . . Definition of Terms. . . . . . . . . . . Methodology Used . . . . . . . . . . . . Limitations of the Study . . . . . . . . REVIEW OF RELATED LITERATURE. . . . . . . . Introduction . . . . . . . . . . . . . . General Considerations in Determining Needs. Establishing Quality Standards . . . . . . . Selection of Sources of Supply . . . . . Bidding Procedures . . . . . . . . . . . Cooperative Purchasing . . . . . . . . . Summary. . . . . . . . . . . . . . . . . III. LEGAL,ASPECTS OF PUBLIC SCHOOL PURCHASING IN MICEIIQNo O C O O O O O O C O O O C 0 Sources of Authority and Responsibility. Elements of a Contract . . . . . . . . . Constitutional and Regulatory References to Contracts . . . . . . . . . . . ... Statutory Authority. . . . . . . . . . . Court Decisions. . . . . . . . . . . . . State Attorney General's Opinions. . . . Common Contractual Problems. . . . . . . Delegation of Authority. . . . . . . . . Summary. . . . . . . . . . . . . . . . . iii Page ii vi viii mG-P-PD—i 10 10 12 16 21 23 29 32 36 36 38 39 4O 4O 42 43 45 47 Chapter IV. PURCHASING INSTRUCTIONAL SUPPLIES IN MICHIGAN PUBLIC SCHOOLS: FINDINGS AND SUMMARY. Introduction. Presentation of Data. . . . . Summary of Findings . ... . . . . . . . Validating Opinions of Superintendents and Vendors . . . V. CONCLUSIONS AND RECOMMENDATIONS. Recapitulation. . . . . . . . Conclusions . Recommendations . . Suggestions for BIBLIOGRAPHY. . APPENDIX.A. APPENDIX B. . . APPENDIX C. Q Further Study iv Page 48 48 52 95 107 111 111 112 114 117 119 124 126 129 LIST OF TABLES Table Page 1 Response to Questionnaire on School Supplies. . 49 2 Number of Districts Reporting Administrative Purchasing Limitations, by District Size. . . 58 3 Which Vendors Have Generally Furnished'Most Classroom Supplies in Recent Years. . . . . . 71 4 How Much Purchasing the Intermediate Office Does for the Primary Districts. . . . . . . . 91 5 Reasons Reported by Intermediate Districts for not Doing Any Primary District Purchasing . . 92 6 What Intermediate District Superintendents Believe Should be Their Functions, as far as Cooperative Purchasing Is Concerned. . . . 94 7 Summary of Current Purchasing Practices in Terms of Practices Recommended by Author? ities O O O O O O O O O O O I O O O O O C O O 103 Figure 10 11 12 13 14 15 LIST OF FIGURES Per Cent of Districts Having Written Purchasing POIiCieS. O O O O O O O O O O O O O O O O Q Who Determines What Instructional Supplies Are Used. 0 O O O O C O O O C O O C O C O O C 0 Degree to Which Printed Instructions.Are Issued for the Use of Supplies . . . . . . . . . . Per Cent of Districts Charging Fees for WOrk- books, Laboratory Materials, and Classroom supplies. 0 O O O O O O O O I O O O O O 0- O Authorization of Administration to Make Purchases Within Prescribed Limits. . . . . . . . ... . . Frequency with Which Supplies Appropriation Is Known . . . . . . . . . . . . . .1. . . . . Degree of Usage of Petty Cash Fund. . . . . . General Features of Specifications. . . . . . Completeness of Specifications. . . . . . . . Sources Used in Preparing Specifications. . . Who writes the Specifications . . . . . . . . Is a Single Selection.Made'When a Supply Item Is Purchased? . . ... . . . . . . . . . . . Per Cent of Preference for Local Dealers. . . Per Cent of Districts Maintaining a List of Qualified Vendors . . . . . . . . . . . . . Per Cent of Districts Maintaining the Bidding Record 0f EaCh Vendor o a a a o o a o o o o vi Page 53 54 55 56 57 59 6O 61 62 63 64 65 66 67 68 Figure 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Number and Per Cent of Supply Vendors. . . (This question, which was concerned with vendor identification and geographic location, was not presented graphically.) Sources of Instructional Supplies. . . . . Title of the Person Responsible for Purchasing Degree to Which Discounts Are Taken. Methods Used to Solicit Bids . . . . On What Bases Bids Are Awarded . . . Degree of Purchase Order Usage . . . Methods Used in Making Small Local Purchases When Competitive Bidding Is Used . . . . . . Features of Written Bid Invitations. To Whom Bid Invitations Are Sent . . Degree to Which Bidders Are Usually Present When Bids are Opened . . . . . . . Bidding Time Allowed . . . . . . . . Degree to Which Samples Are Submitted with Bids. Reasons for not Participating in Cooperative Purchasing . . . . . . . . . . . . . . . . . Extent of Participation in Cooperative Purchasing . . . . . . . . . . . . . . . . Estimated Per Cent of Savings. . . . . . . . . Reported Advantages of Cooperative Purchasing. Problems Reported in Cooperative Purchasing. . Number of Vendor Delivery Points . . . . . . . vii Page 69 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 . 90 LIST OF APPENDICES Appendix Page A Letter which Accompanied Questionnaire, from Alexander J. Kloster to Superintendents. ... . 124 B Questionnaire on Purchase of Instructional Supplies . . . . . . . . . . . . . . . . . . . 126 C Purchasing Questionnaire for Intermediate School Districts . . . . . . . . . . . . . .,. 129 viii CHAPTER I INTRODUCTION BACKGROUND OF THE STUDY An upward trend in supply expenditures has been noted by McLure : Materials of instruction recently have taken a sharp up- turn in dollar volume . . . . From 1935 to 1945 these materials increased 26 per cent in total dollar volume, while the in— crease was 185 per cent from 1945 to 1955. It is known . . . that instructional materials are assuming an increasing imp portance in the schools.1 The above statement, in pointing out the larger role played by instructional supplies, focuses attention on purchasing practices in this area. Buying the best school supplies at the lowest possible cost remains one of the challenging responsibilities of the adminis- trator. Post—war population growth has emphasized the quantitative aspect of purchasing. As school systems have increased in size, the volume and variety of instructional materials have grown space. With larger size have also come additional commitments. Simple procedures become more specialized when developments such as school food programs, a broader curriculum, and special services are added. g 1WilliamP. McLure, Educational Cost Analysis (Urbana, 111.: Bureau of Educational Research, University of Illinois, 1957), p. 21. 2 Likewise, the administrative features of purchasing are subject to examination. Local board policies, to the degree that they facilitate purchasing, hinder or enhance the district's educational program. There is considerable variation among district practices, for example, in matters such as financial controls and delegation of purchasing authority. Any study of purchasing practices also involves the character and classification of school districts. The Superintendent of Public Instruction reported in 1900 that there were 7,163 school districts in Michigan, mostly primary. Today there are 1,500 districts, of which 604 provide both elementary and secondary education large enough to employ a superintendent. The balance are primary districts which have no superintendent, and provide limited education. Legally un— able to operate any grades above the eighth, primary districts, be- cause of their small size, are characterized by lack of specialization in purchasing.- If purchasing economies are to be developed here, they are generally dependent on the leadership of the intermediate office (formerly known as the county office). If a primary district has a school census of more than seventy- five and less than 2,400 children between the ages of five and twenty, it may organize as a fourth class school district.2 In this classi- fication it may establish a high school and employ a superintendent. ZMichigan General School Laws, (Revision of 1959—1960), sec. 340.52. 3 The hiring of a superintendent is mandatory if twelve or more teachers are employed.3 Thus the responsibility for the district shifts, as the district increases in size, from the intermediate district super— intendent to the superintendent of the individual school district. As districts continue to become larger, the administration staff performs a more specialized purchasing function: voters of a fourth class district can achieve third class status if the school census is between 2,400 and 30,000 children; districts of the second class are those cities having a population of more than 125,000 and less than 500,000, while districts of the first class are those attaining a school census of 120,000.4 From the simple purchasing routines of the primary district to the highly refined purchasing procedures of the second and first class districts, there is a sub- stantial range in purchasing organization. In light of the foregoing bases for variations in district purchasing practices, there is a need to surveyand compare them. The merit of the comparisons lies with the individual districts. Any resultant action must be in terms of each district's circume stances. Calling attention to similarities and differences does not imply a single solution to common problems. 3323g., sec. 340.66. 41b1d., secs. 340.102, 340.142, 340.182. l4. STATEMENT'OF THE PROBLEM The study is concerned with the practices employed in the purchase of instructional supplies in.Michigan public school dis— tricts. Its purposes are to: 1. Identify criteria for current purchasing practices; 2. Develop the legal framework within which the purchasing function operates; 3. Survey current practices; 4. Compare the practices with those recognized as desirable, in accordance with the criteria established. DEFINITION OF TERIB Terms used were adapted from Reason and White: Supplies: any articles or materials which meet any one or more of the following conditions: it is consumed in use; it loses its original shape or appearance with use; it is expendable; it is inexpensive; it loses its identity through incorporation into a different or more complex unit or substance (textbooks are considered a special classification, not included with supplies). Instructional Supplies: those supply items used directly in classroom instruction. 5 Purchasing: the contractual aspects of procurement, those which involve vendors. Cooperative Purchasing: the involvement of more than one school district in any aspects of purchasing. 82125: the public school district official responsible for purchasing. Vendor: a potential seller of supplies to a school district. Responsible Bidder: a vendor who can physically and finan- cially furnish supplies in accordande with specifications. Specifications: a written description of a supply item.which informs the vendor what is wanted. . Quotation: price obtained by informal request. Bid: price obtained by formal request. Bid Proposal: formal notice to the buyer by the vendor, stating the conditions and price by which he will furnish the specified supplies. Contract: formal action establishing purchasing agreement terms. Purchase Order: formal authorization from the buyer to the vendor to furnish supplies. Invoice: formal statement to the buyer from the successful vendor, listing the price and terms of payment for delivered supplies.5 5Paul Reason and Alpheus White, Financial Accounting for Local and State School 8 stems (washington: United States Government Print- ing Office, 19575, pp. 214-235. 6 METHODOLOGY USED Establiphipngriteria Derivation of recognized standards by which current practices may be compared is a requisite for this study. Stated in the form of desirable rather than absolute criteria, they provide a reliable yardstick. They were developed and Validated by the followingfmeans: l. The Purchhsing and Supply Management Handbook,6 published by the Association of School Business Officials of the United States and Canada, was selected as the field authority. 2. A review of the literature supplemented and validated the Handbook. 3. The chairman of the Handbook Committee reviewed the pro- posed standards. 4. Reactions to the standards and to the questionnaire were obtained in interviews with eight superintendents and the two major suppliers. 5. To further validate the list of standards, the legal back— ground of practices was prepared as a chapter for inclusion in the study. On the basis of the above steps, it was concluded that the standards could be used as a valid basis for judging current practices. RAssociation of School Business Officials, Purchasing and Supply Management‘Manualgfor School Business Officials, Bulletin No. 22, (Evanston, Illinois: The Association, 1962). Collecting Data The study is normative survey research. In order to determine present purchasing practices, a thirty-seven item.questionnaire (see Appendix B) was distributed tozfll Michigan public school districts having a superintendent, 604 in all. Questions covered four aspects of pur- chasing, following the.Association of School Business Officials' delinea- tion: (1) general considerations in determining needs, (2) establishing quality standards, (3) selection of sources of supply, and (4) bidding procedures. Included in the last was a section on cooperative purchasing, to determine the extent of its practice. Questions were selected on the basis of what would provide a clear profile on local policies and pro- cedures. A letter of transmittal accompanied the questionnaire (see Appendix A). A seven-item questionnaire was simultaneously sent to the seventy—seven superintendents of the intermediate school districts (see Appendix C). The purpose was to get information on how much purchasing is done by the intermediate office. Emphasis was placed on (1)'the role of the intermediate district superintendent in coor- dinating purchasing for the systems in his district, and (2) the status of cooperative purchasing. . Interviews with a cross-section of superintendents and representatives of the two most popular school supply houses pro— vided a source of validating data. The questionnaires were used as a basis for discussion. Expressions were obtained on the actual practices as well as what the interviewees recommended. Presentation of Data This study is presented in five chapters which are organized in terms of areas generally related to the problems of purchasing. Each of these areas becomes a chapter in the presentation. Chapter I includes a statement of the problemand introduction to the study. Chapter II reviews the relevant literature, supplementing and vali- dating the criteria used. Chapter III contains the legal aspects of public school purchasing in Michigan, providing a framework for cur— rent practices, plus further validation of standards. Chapter IV presents the findings and summary. Chapter V has the conclusions and recommendations. LIMITATIONS OF THE STUDY The following limitations have been made in order to properly define the scope of this study: Only those Michigan school districts having a superintendent, plus the intermediate districts, were included. Practices were evaluated on the basis of standards recommended by the Association of School Business Officials and other authorities. The purchasing aspects were limited to general considerations in determining needs, establishing quality standards, selection of sources of supply, and bidding procedures. 9 Districts were asked to report current practices in pur- chasing instructional supplies only. The assumption was that this area is a common one in all districts, both in the items and sources used. School personnel responsible for purchasing supplied the data for the study. No attempt was made to equate personal variations in the number of years of purchasing experience. CHAPTER II REVIEW OF RELATED LITERATURE INmODUCLION The evolution of modern purchasing practices was accelerated after world war II. Introduction of new materials and products, greater use of automated systems of production and control, and improved marketing methods were among the major forces that con- tributed to this modernization. The transition has been character- ized by a more flexible approach to purchasing organization and problems. There has been evolving less "how-to-do-it" thinking; broad principles are replacing blanket rules; there is less em, phasis on all-inclusive "right" answers and more on adaptation to changing conditions; there is more involvement of users as compared with the strictly administrative and impersonal models formerly advocated; more control and latitude are being extended to adminis- trative units. Most important is the recognition that policies should be adjusted to the structure of each system, that application and improvement are contingent on the syntality of each district. 10 11 This does not mean that earlier contributions have lost their value. On the contrary, many of their features are just as pertinent today. For example, Linn1 suggested valuable guidelines which are still relevant. The bulk of the writings, however, were fragmentary, and reflected a static concept of the purchasing function. In light of newer perspectives, the review of background re- search readings for this study have been restricted to the period from the late 1940's to the present. The cumulative nature of current articles and studies makes inclusion of earlier sources redundant. To gain a complete insight into the earlier concepts of pur- chasing the following readings are recommended: Taylor, Robert B. “Epinciples of School Supply Mpnagement. Contributions to Education, No. 228. New York: Bureau of Publications, Teachers College, Columbia University, 1926. Gushee, Edward, and Boffey, L. F. Scientific Purchasing. New York: McGraw-Hill Book Company, Inc., 1928. Reeder, ward. Fundamentals of Public School Administration. New Yerk: The Macmillan Company, 1930. Moehlman, Arthur. Public School Finance. New York: Rand McNally and Company, 1927. Morrison, Henry C. Management of the School Money. Chicago: University of Chicago Press, 1932. "Thirty-six Principles for the Selection, Purchase, and Management of School Supplies and Equipment," The American School Board Journal, 95:39, July, 1937. 1HenryH. Linn, Practical School Economies (New York: Columbia University, 1934), pp. 60—89. 12 In the remainder of this chapter modern literature has been reviewed in the four procurement areas which are directly related to the purchasing function: (1) general considerations in determining needs, (2) establishing quality standards, (3) selection of sources of supply, and (4) bidding procedures. An additional section has been included on cooperative purchasing. GENERAL CONSIDERATIONS IN DETERMINING NEEDS The size of the school system, the type of community, the scope of the curriculum, and the legal bounds, all affect the pur- chasing function. In addition, the budget, both by its size and allocation, has a direct influence on fulfillment of supply needs, as does the degree of participation and cooperation among personnel andpdepartments. Numerous studies have shown how inherent are the above fac- tors. A statewide study of Kentucky by Little2 found poor practices in purchasing, in such aspects as board participation, preference for local bidders, a wide range of local budgets spent on supplies, and variations in time required for payment of invoices. 2Thomas C. Little, The Administration of School Supply Pur— chases in Kentucky (Nashville: George Peabody College for Teachers, Contributions to Education No. 408, 1949). 13 In a study of 138 districts in.Washington, Leaden3 found failure by school boards to formulate and adopt written statements or purchasing policy regarding purchasing, and inadequate use of specifications and competitive bidding among most small districts. As a means of withstanding local pressures, including in- terests of board members, Reavis“ stresses the need for establish- ing and adhering to purchasing policies. Roe5 says that policy statements should present the best judgment and thinking of the board. Bluhm6 recommended that policies involve both administrator and teacher in their formulation. In his study of twenty-two Penn- sylvania districts, he recognized the need for training teachers in the ordering and use of supplies, instruction of administrators in business practices, and greater utilization of staff. ‘Mort, Reusser, and Polley suggest the following selection procedure for supplies: 3John'W'arren Leaden, "A Study of School District Purchasing Practices in the State of Washington with Special Reference to Cooperative Purchasing Through the King County School Directors' Association" (unpublished Doctoral dissertation, University of washington, Seattle, 1952). “W; C. Reavis, "Hazards of Local Politics in School Business ,Administration,“ Education Digest, XIX (March, 1954), pp. 12-13. 5Williaml-l. Roe, School Business Management(New York: ‘McGraweHill Book Co., 1961), p. 130. 6Bluhm, “Suggestions for Improvement of Practices of Pur- chasing, Storing, and Distribution of Teaching Supplies Based on a Study of Some Small and Medium.Sized Schools in Pennsylvania" (unpublished Doctoral dissertation, Pennsylvania State University, State College, 1954). 14 l. Involve the users. 2. Establish cooperation among users to avoid duplication. Standardize lists. 3. Base standardization on adaptability, quality, and use. 7 Such involvement does not preclude specialized contributions. Melton8 points out that those especially trained for and experienced in teaching are best qualified to select instructional supplies (i.e. what to buy); likewise, those qualified should decide how to buy. Buying decisions, he adds, and authority to implement them, must be centralized in the purchasing department. Greater involvement of the state department of education is a frequent recommendation. Whether aid from this source is regulatory or advisory, there is concern expressed regarding the inability of school districts, particularly smaller ones, to purchase effectiVely. Fullmer suggests that the state department of education should: 1. Designate the types of supply and equipment items which might be purchased with the aid of the state purchasing office. 2. Supply school districts with standardized bid invitation forms. 3. Evaluate each school as to the adequacy of supplies and equipment, and the efficiency with which these supplies and equipment are procured and maintained. 4. Periodically make available information concerning unit costs in local school districts for various items of supply and equipment.9 7Paul Mart, walter Reusser, and John Polley, Public School Finance (New York: McGraw-Hill Book Co., 1960), pp. 450-1. 8Monroe Melton, "Practices in.Awarding Tie Bids on Supplies and Equipment," School Business Affairs, June, 1963, p. 16. 9Ethan Yale Fullmer, "An Evaluation of Procedures for Pur- chasing School Supplies and Equipment in Oregon Public Schools, Including a Survey Of Cooperative Purchasing in the United States" (unpublished Doctoral dissertation, University of Oregon, 1960). 15 Among similar recommendations is one by Grahauiwho believes that state departments of education should enlist the aid of comp petent persons within the state to establish guides to be followed by practicing administrators. He further advocates an in—service pur- chasing training program for administrators, to be initiated by the county superintendent.10 Some writers have noted that larger school systems follow desirable purchasing practices more than do the smaller districts. 11 observed this in his study of industrial arts supplies, Bunten although there was more agreement than disagreement in procedures followed in their purchase. It is recognized that larger district size does offer in- herent advantages. There is greater purchasing power which in turn promotes competitive bidding. There is a larger number of local vendors, i.e. sources of supply. Specialized purchasing per- sonnel are employed in the larger systems who can devote all their time to promoting more efficient buying. Various suggestions have been made to enable small districts to utilize many of the larger district practices. Levin states 10William David Graham, "Comparison of Actual and Preferred Practices of Purchasing in Selected Local Districts in Certain.0hio Counties" (unpublished Doctoral dissertation, Pennsylvania State University, 1961). 11Charles A. Bunten, "Selecting, Purchasing, Issuing, Finan- cing, and Accounting for Industrial Arts Supplies in the.Secondary Schools of Missouri" (unpublished Doctoral dissertation, University of Missouri, 1955) . 16 that advantages can be derived by the small system (one to two thousand students) through bulk buying. He also endorses competi- tive bidding and eliminating preference for the local supplier.12 An example of how meeting needs could be improved was re- ported by Shinneman. In a K-12 system.with 6,000 students and twelve schools, an analysis of purchases was made to determine why purchasing took so much time. On the basis of the findings, policy was made less restrictive, as shown by the following: thhod or Old New Procedure Policy Policy Restriction on purchases Up to $50. No comparative limit Administrative judgment None recognized Up to $500. as to procedure used Telephone quotations Range $50. to $1000. More than $2000. Board approval More than $1000. 'More than $2000. Bid rejection Only by board By administration13 ESTABLISHING QUALITT'STANDARDS There seems to be general agreement that determining quality is (l) a cooperative matter between purchasing personnel and users, and (2) subject to periodic evaluation because new and superior products are constantly coming into the market. A third aspect of quality, one which presents many problems, relates to having 12Sol Levin, "How Small School Systems May Adapt in Purchas- ing Some of the Better Practices of the Larger School Systems to Fit Their Needs" Association of School Business Officials of the United States and Canada, Proceedings of the Convention, (Evanston, Illinois: The Association, 1958), pp. 331—2. 13Dean Shinneman, "How to Streamline Purchasing," The Nation's Schools, 68:57-58, July, 1961. l7 adequate but not excessive requirements. As Ritterskamp, Abbott, and Ahrens point out: Quality is a variable and has a wide range. One of the pri- mary functions of purchasing is to establish, on the quality range, the minimal product quality regarded as suitable for the intended use within the institution. Above this minimum quality point the buyer will generally find several products competing for acceptance, each varying to some extent in suitability factors. The constant problem is to determine which one has the highest degree of suitability.14 Differentiating qualities necessitates considerable judgment, but as Burns15 notes, unless the minimum standards are indicated, bidders will frequently offer several qualities, not knowing what quality will be accepted. Sources and Preparation of Specifications As supplies are used in the schools or tested in laborhtories where possible, standards may be determined which are best adapted 16 A primary source of information is to the needs of the users. the teacher, particularly in the small systems where neither testing laboratories nor funds are available. Elliott states that this is usually done informally, perhaps unscientifically and without engineering help, but numerous standards are nevertheless developed . - 17 within the district. ‘Outside sources used in preparing specifications include per~ sonnel from other schools and districts, users in industry, and 1”James Ritmerskamp, Forrest Abbott, and Bert Ahrens, Pur- chasing for Educational Institutions (New York: Teachers College, Cqumb a UniverSity, 1961), p. 146. 15J. Spilman Burns, "Quality is Measurable," Association of School Business Officials of the United States and Canada, Proceedings _of §pe Thirty—ninth Convention, (Evanston, Illinois: The Association ), p. 246. ‘ 16Mort, Reusser, and Polley, op. cit., p. 453. 17Ralph Elliott, “How to Establish Usable Purchasing Stan- dards," The Nation's Schools. 59:94. March. 1957. 18 suppliers, either by direct contact with salesmen or through cata- logs. From internal and external sources relevant data are obtained as a basis for specifications. 'The preparation of such specifications is thus conceived of, not as a function solely of the purchasing de— partment, but a cooperative one, involving many sources. Completeness of Specifications Following determination of quality, the next step is to convey to prospective suppliers a description (specification) of this quality. ,O'Hearn states: Specifications need not constitute bulky documents. Observe these steps: Decide the quality of materials you intend to buy, describe this quality in measurable terms, and define the minimum quality acceptable. You may not need the highest quality. The quality you want is the one most valuable for the specific purpose.18 Degree of description varies considerably. While the brand—name specification is most widely used because of its simplicity, Larke cautions: Buying goods that have a well known brand name has been con- sidered by some to be a sound purchasing practice. It is thought that after a good name is established, the buyer can purchase with blind confidence because the manufacturer who sells by name puts into his product all of his ingenuity and skill to keep it the very best of its kind. Perhaps on some brand names we can still rely,but other name brand companies must have been sold out to some of those who do a remarkably good job of making the goods worse in order to sell for less.1 18Aldan O'Hearn, "Purchasing," The Nation‘s Schools, 67:66, January, 1961. 19George R. Larke, “Test the Quality of Purchases and Save," American School Board Journal, 139324-25, December, 1959. 19 There is substantial agreement among authorities that con- fining specifications to brand names is insufficient. One cannot always depend upon trade names or brands alone without knowing more specifically the details of construction, composition, and nature of goods.20 Standardization Minimizing the varieties of supplies used facilitates pro- curement. Some writers recommend standardizing regularly—used items because it utilizes a fixed specification and more consistent quality. As part of a standardization program, items which may be used for the same purpose may be reduced in number and a standardized supply list made available to all users.21 Administratively, the use of standard supply lists offers the advantages of consolidating quanities, processing fewer purchase orders, and buying more economically be- cause of volume and scheduling. In order to make supply lists effective they must be re- viewed regularly. According to Reeder, provisions must be made to drop less important items and to add new ones that are more ef— fective. Carrying standardization too far, however, may result in handicapping educational service.22 20Mort, Reusser and Polley, 10c. cit. 21J. S. Peters and C. A. Briscoe, "Standard Supply Lists," The Nationfs Schools, LV:104, March, 1955. 22Ward Reeder, Fundamentals of Public School.Admdnistration (New York: Macmillan Co., 1958), p. 314. 20 Local Vendors The problem of preference for local vendors is expressed in the following: A five per cent premium for local purchases doesn't seem a high price to pay for keeping money in circulation in the locality and for rewarding a worthy firm that carries a share of the school district's cost--even when price and quality aren't altogether best. But school districts that lean too hard on local sources for their purchasing may be spending too much money for too little product and service. Local dollars are best kept circulating locally you may be told. This is a truism which in this case deserves another: school purchasing agents have an obligation to select the best merchandise at the lowest possible price. Suppliers benefit from a buy-locally policy. Schools do not. They pay for a rather ephemeral "good will." Often the school can't even count on better service from the local supplier. When a sale is certain, the zeal to give extra service is sometimes transferred by suppliers to more doubtful accounts. When accidents of geography carry more weight than a low bid meeting specifications, sealed competitive bidding be— comes unnecessary. The whole competitive price structure is weakened by a decision to make an award subjectively-~not based on price, service and meeting specifications.23 Roe states that because of pressures from local suppliers, the purchasing agent may believe that good public relations justify patronizing them. Basically, however, good purchasing principles require that the purchaser buy the quality he needs wherever he can get the best price.24 Since schools are agencies of the state, and receive a large portion of their revenue from it, any local preference is like a subsidy to such business interests.25 23Aldan O'Hearn, "How Much Local Purchasing is Enough?" The Nation's Schools, 72:43, August, 1963. 24Roe, op. cit., p. 138. 25Morphet, Johns, Reller, op. cit., p. 489. 21 A more acceptable practice is awarding to local suppliers when bids are equal. Melton's study of eighteen Florida districts in- dicates such a practice in dealing with bidders who are out of the county or out of the state.26 SELECTION OF SOURCES OF SUPPLY Ritterskamp, Abbott, and Ahrens state that sources of vendor selection include the buyer's experience (potentiallytiis is the best guide), salesmen, catalogs, trade directories, trade journals, and conventions. Preparing and maintaining a list of qualified vendors from these sources is an important asset to purchasing. In rating suppliers, the following factors should be considered: spast experience, reliability, accessibility, financial position, shipping care, adequacy of inventory, and availability of special advisory service.27 Not only is it important to have an approved vendor list, but the bidding record of each vendor is also helpful. The purchaser is thus able to know at all times the distribution of the pur- chasing dollar, as well as the relative competitive status of all suppliers. Any consistent decline or increase in such status, or in the number of suppliers, may have implications for current specifications. Melton, loc. cit. 7 _ 2'Ritterskamp,Abbott, Ahrens, op. cit., pp. l93~l94. 22 What conduct do purchasers and suppliers expect of each other? The expectations that the purchaser has of the vendor, according to Fegley, are that he: 1. Knows the various requirements for school operations, and is able to make constructive suggestions; . Is concerned about delivery, follow-up, and performance; Is able to use appointment time to good advantage; Maintains high ethical standards; Follows established purchasing procedures; . Guards against offensive conduct. Chm-Pure I What the vendor has a right to expect from the school system is stated by Burch as: l. Honest and reliable delivery requirements. 2. Bidding programs conducted so as to make the transactions as convenient and profitable for the vendor as possible. 3. Providing clear-cut descriptions of materials. 4. Explicit instructions for shipping and billing. 5. Prompt attention to inspection of goods and to payment of invoices.29 .Some writers have noted that the number of suppliers utilized by a school district is potentially extensive because of the wide range of items. In practice, however, because most supplies are of a general nature rather than highly specialized, only a few general— supply vendors furnish the bulk of a district's requests. Some small systems have only one, two, or three suppliers. Such an 28Paul V. Fegley, "Adding Suppliers and Dealing with Cur— rent Suppliers," Association of School Business Officials of the United States and Canada, Proceedings of the Convention, (Evanston, Illinois: The Association, 1961), p. 152. 29Raymond R. Burch, "Purchasing," The Nation's Schools, 67:80, June, 1961. 23 arrangement has the advantages of convenience and simplicity, but may involve somewhat higher prices. On the contrary, with important items, it is advantageous to have multiple sources of supply to in- sure uninterrupted deliveries. If the total business is so small that dividing it would make it unprofitable to all those who might seek it, it would probably be better to concentrate purchases with one or two suppliers. Five or six suppliers should be considered a maximum in almost any line.30 BIDDING PROCEDURES Soliciting Bids Informal bids and quotations are used predominantly in the purchase of supplies. In soliciting prices, Crawford suggests that the following be considered: 1. Use concise specifications so that all companies bidding will know exactly on what to bid. 2. Whenever possible use open specifications to avoid the charge of favoritism. 3. Whenever possible samples of quoted material should be sub- mitted. 4. .A satisfactory company product may be used as a standard. 5. Indicate whether the low bid for equal quality will be accepted. 6. All material should be quoted delivered to the school or to one delivery point. 7. Indicate delivery possibilities on the bid. 8. Send out bids in duplicate.31 A Ag 30Ritterlskamp, Abbott, Ahrens, op. cit., p. 195. 310. C. Crawford, "Ethical and Practical Implications of Bidding Policies,“ The Nation's Schools, 51:100, 102, February, 1953. l 24 In order to maximize the number of bids submitted, a variety of media are used. Most commonly employed are local newspapers and trade journals, posting public notice, and writing or telephon- ing vendors. Competitive bidding is recommended by purchasing authorities. Principles underlying it are: 1. To give vendors equal opportunity. 2. To prevent favoring one vendor. 3. To keep taxpayers informed. 4. To prevent fraud.32 Small districts do not practice competitive bidding, but as they increase in size may do so with considerable savings. Burns, points out how consolidation of orders makes competitive bidding more feasible: In many smaller districts, each school selects a supply catalog and each teacher orders the items needed for the next year. The principal collects the list from each teacher, clips the orders together, and forwards them to the central office, whence they are forwarded to the supply house for a quotation. Under this system the supplies are packed separately for each teacher. Because each teacher often selects different brands and because the catalog references frequently provide an insufficient description for other dealers, it is virtually impossible to obtain competitive bids. The net result is that the supply house whose catalog numbers are specified is in a very favorable position. Prices quoted frequently are the list prices in broken quantity lots. 32The University of the State‘of New York and the State Department of Education, Purchases and Stores (School Business ‘Management Handbook No. 5, Albany, New York: University of the State of New York and State Department of Education, 1956), p. 37. 25 In one such system needed items were consolidated and pack- aged for delivery to the individual schools, instead of the individual classrooms, and several bids were procured. As a result, there was a saving of twenty five per cent in the cost of the materials ordered. What had previously cost about $20,000 was procured for about $15,000.33 According to Redmond and Pearson it is good practice to ob- tain prices from several vendors. In addition to the probability of greater economy, school officials are protected from criticisms of favoritism. Maintaining a list of eligible, qualified vendors, and keeping in contact with them, produces competitionind better , 34 prices. There is concensus that the purchaser should always reserve the right to reject any or all bids.35 Reeder favors this policy on an individual item basis, i.e. a bid can be accepted on one or more items of the same firm, and rejected on others, because price differentials between vendors may vary with each item.36 Bidders should be given at least three weeks from the time | of advertising, in which to prepare and submit their bids.37 'While there is agreement that this period is optimum, where the number of items is not extensive so long a period is unnecessary. 33H. Spilman Burns, "How to Buy with Both Economy and Quality in Mind" The Nation's Schools, 68:64-69, October, 1961. 3QJ. F. Redmond and A. G. Pearson,"Purchasing School Supplies in a Big City System ".American School and University, XXV (1953), pp. 373, 376. 3SMort, Reusser, and Polley, op. cit., p. 457. 36Reeder, op. cit., p. 322. 37Ibid. 26 When bids are opened, it is recommended that bidders be present. As Linn points out, they are entitled to attend, especially if a substantial figure is involved, and it is question— able whether this privilege should be denied them.38 Brainard re— flects the common view when he states that after bids are publicly opened, all bidders are entitled to know their competitots' prices and other pertinent information.39 Authorities agree that samples should be submitted with bids. While samples are frequently not required if brand names are specified, any situation where alternate brands are offered should involve samples for comparison. Most small districts can provide only cursory inspection of such samples or testing under actual classroom conditions. Any tests of a technical nature, while desirable, cannot be made. Linn recommends that awards should not be made to suppliers who fail to submit samples, catalog cuts, or other data called for.“0 Awarding Bids Under normal circumstances awards are made to the lowest bidder, who is sometimes designated in more qualified terms as the "lowest responsible bidder,“ or "lowest bidder meeting speci- fications." 38Henry H. Linn, School Business.Administration (New York: The Ronald Press, 1956), p. 271. 39 A. D. Brainard, "Fifty Do's and Don'ts about School Pur— chasing," Michigan School Board Journal, December, 1957, pp. 2—14. uoLinn, op.cit., p. 272. 27 Bids may be requested, and awards made, on the basis of in- dividual items, a combination of them, or by lump sum. ‘Many ad— ministrators prefer to believe that supply awards are made on the basis of total considerations, including price, quality, and service. Conditions of Payment The extent to which purchase orders are issued varies. Brainard recommends that they be used for all pUrchases, so that the quantity, description, price, delivery date, terms and other related information are clearly understood by both purchaser and supplier.41 Fullmer‘s study indicated general agreement on the importance of issuing purchase orders for all items, but only 62.0 per cent of the reporting districts did so in actual practice]+2 The major reasons for failure to adopt purchase orders as the exclusive instrument of payment are related in great part to small purchases, where the purchase order represents a high per- centage of the cost, is more time-consuming, and less convenient than other means such as a petty cash fund. One study showed the following: An analysis of previous purchase orders revealed that approximately 90 per cent of all orders were for less than $100, 51 per cent were for less than $25, and 25 per cent for less than $10. It had been estimated that the cost of processing a purchase order was $3.90, or 40 per cent of the value of one-fourth of all orders.43 41Brainard, loc. cit. “zsullmer, op. cit., p. 144. “3"How to Improve Your School Business Procedures," School jgganagement, September, 1959, pp. 43-46, 92-94. 28 In spite of disadvantages, it is further recognized that small purchases are frequently necessary. The following steps are helpful in reducing the number of purchase orders for small pur- chases: make arrangements with local dealers to purchase items up to $25 on charge, to be billed monthly; use petty cash purchahes up to $10; call for requisitions for certain types of supplies on specific days in omder to increase the possibility of consolidating orders; expand the use of annual contracts with monthly deliveries.44 The area most in need of speed-up, However, is that involv- ing discounts. Discounts represent rewards for prompt payment.“5 In taking advantage of discounts offered, be they trade, quantity, chain, or cash discounts, a school district can save far more money than is generally recognized. Reeder states that for the United States, there is an annual 1088 amounting to hundreds of thousands of dollars, all of which is unnecessary.46 ‘Most frequently cited as the major reason for failure to pay all bills promptly, and thus take advantage of the discounts offered, is insistence by the board of education that ittpprove all bills prior to payment. Such delay beyond the time specified is frequently ignored, and the discount is taken regardless of when payment is made. Ritterskamp, Abbott, and Ahrens say that taking the discount ““Ibid., p. 92. fl usErnest W} Fair, "Discounts are a Secret of School Budget .Savings," The Nationis Schools, XLVI:78, October, 1950. 46Reeder, op. cit., p. 323. 29 after the discount term has expired violates terms of the sale and is a form of ”sharp practice“ in purchasing. It is a practice which cannot help but harm relations between the institution and the vendor.l+7 In recent years, however, more authority has been delegated to approve purchases, and for larger amounts. There is, accordingly, reason to believe that substantial delays are due to a second source: cumbersome payment procedures. MMch can be done to reduce the period between receipt of the invoice and payment to the vendor. 'Modern machine accounting methods are making substantial contributions in this area. COOPERATIVE PURCHASING Cooperative purchasing may be described as the involvement of more than one school district in any aspects of purchasing. Opinions on its merits are divided. Joyner says: There is a lot of talk about cooperative purchasing. It is an old subject. I remember going into it about 25 years ago. It is a little bit like the 12-months school--it looks better on paper than it does in practice. However, I think there is a place for some cooperative buying, and I would say if it is to your advantage to do it on certain items, use it and forget it on others.“8 47Ritterskamp,.Abbott, Ahrens, op. cit., p. 249. 48Schuyler Joyner, General address given at annual meeting of Association of School Business Officials of the United States and Canada, October 18, 1962, Proceedings of theyConvention (Evan- ston, Illinois: The Association, 1962), pp. 355-367. 30 Fullmer found cooperative purchasing to be the most con- troversial subject in his entire study. Forty-six respondents agreed with the following statement, while thirty-four disagreed: Supplies and equipment should be purchased cooperatively with other school districts or other governmental agencies through a competitive bid procedure where benefits of mass buying would be possible without reducing quality or service, or without interrupting the educational program.49 Cooperative purchasing was reported being practiced in twenty— seven states, including the states having provisions for centralized purchasing at governmental levels above the local district. Al— though cooperative purchasing was widespread, it also was practiced sporadically in many instances.50 The major benefit of successful cooperative purchasing organization lies in greater savings. The 130 respondents in Fullmer's study reported an estimated savings ranging from four to forty per cent.51 Other values are reported by the Oakland County, Michigan program which includes cafeteria supplies, paper, typewriters, and school bus bodies: 1. The activity demonstrates the school officials' concern for fiscal responsibility. 2. Every aspect of the procedure provides a practical, pro- fessional growth experience for personnel involved. 3. School officials share benefits from the talents of co- workers in other school districts. #9Fullmer, op. cit., p. 147. SOIbid., p. 240. 511b1d.. p. 153. 7. 31 Buying in quantity exacts from the participants increased efficiency in planning. Standards of quality tend to remain high, since delivery of sub-standard products becomes the concern of all participating districts. Non-participating districts reported that vendors were meeting some cooperative bid prices, a fact that is more than just coincidence. Administrators and suppliers realize a savings in time.52 Disadvantages of Cooperative PUrchasing Roe states that one possible danger is that the bureaucracy and red tape involved might become so cumbersome as to limit flexibility and local adaptations. 1. 53 Other problems include: If a district does not have central warehousing, one- stop deliveries can be more costly than deliveries to several locations. A The individual district gives up many things,and the person or district heading up the cooperative assumes cer- tain burdens and responsibilities. Schools miss salesmen’s call and their accompanying service. There are apt to be fewer materials brought to schools for demonstration. Schools may not have the same degree of adjustment satisfaction. Leadership changes in the cooperative may affect the pro- gram. Large, once-a-year purchases curtail the opportunity for custom attention to curriculum supply requirements. Purchasing of low-bid items may be the rule rather than the exception, sacrificing quality for price. Local autonomy is jeopardized. The case against cooperative purchasing is discussed by McCurrach, who concludes that vendor relationships with school districts are better handled on an individual district basis. 54 A 52"Cooperative Purchasing in Oakland County" Michigan School Board Journal, 7:17—18, April, 1961. 53Roe, op. cit., p. 138. 5“David'McCurrach, “Cooperative Purchasing! Is It Worth It?" School Business Affairs, 28:16-17,22, April, 1962. 32 Conditions Needed for Cooperative Purchasing The factors that make for successful cooperative purchasing are summarized by Hardwick: 1. Sound cooperative buying is contingent upon receptive attitudes among administrative officials of local government. _ They are imbued with the spirit to act jointly. ' 2. Existence of a favorable legal framework: 3. Development of an organized plan to pr vide for leadership, direction, control and management of group action. a. Formulation of a systematic set of standardized procedures and uniform operating rules.55 Based on the above, it appears that cooperative purchasing works for those who organize and make it work. Whether it is worth such effort under all circumstances is problematical until those who are potentially involved investigate and then decide. SUMMARY In recent years there has been more emphasis placed on establishment of district policies that provide a sound basis for purchasing rather than to apply external, single-solution answers. The problem of converting principles to practices thus becomes one of adaptation, so as to provide maximum benefit to the individual district. This process, as the reviewed literature indicates, is both continuous and cooperative. Some writers are concerned with the qualitative aspects of purchasing, those involving different 55Clyde T. Hardwick, "Cooperative Purchasing Techniques for Municipalities" (unpublished Doctoral dissertation, University of‘Michigan, Ann.Arbor, 1956). 33 administrative techniques and standards of operdtion; others con- tribute to knowledge of the quantitative features, the differences due to district size, for example, and what can be done about.them. While there is concensus that different situations justify modified procedures, there is also realization that good purchasing principles have general application. On this basis, the following standards have been used as criteria for data collected in this study. They were derived in accordance with the means shown on page 6 and their arrangement follows the questionnaire sequence. General Considerations 1. written policies are basic to a sound purchasing program. 2. Item selection can best be made when it is a cooperative affair, one which includes users. 3. Printed instructions for supply users are important as a means of obtaining optimum utilization. 4. Charging fees for regular instructional supplies is not good administrative practice. 5. Greater efficiency is promoted When administration is given latitude proportional to district size in making decisions regarding expenditures. 6. Purchasing is facilitated when the supply appropriation balance is known at all times. 7. Within limits, petty cash saves time and mdney in small and emergency purchases. It is best used when restricted in accor- dance with written instructions. 34 Establishing Quality Standards 8. Good business practice calls for specifications that are in writing, that include all items, and must be abided by. 9. Supply specifications vary according to the complexity of the item. .A brief description is recommended as a minimum positive identification. 10. As many specification sources as are available should be used. 11. Specifications, while many sources are used, can best be written by personnel responsible for purchasing. 12. Standardization of supplies, in the form of supply lists, permits greater purchasing economy. Selecting Sources of Supply 13. While there is some merit such as service and prompt delivery in showing preference for local vendors, their prices should be competitive with those of non-local vendors. 14. Establishing and maintaining an up-to-date list of qualified vendors expedites the purchasing program. 15. Maintaining the bidding record of each vendor provides helpful information on the history and current status of each. 16. The number of vendors varies, depending on the subject area, volume of purchase and availability of items. It is important that there be sufficient vendor sources to promote competition. 17. (No criterion was sought for this question, which was concerned with vendor identification and geographic location.) 18. Regardless of the number of sources used in purchasing, the aim is to purchase what best serves the district's needs. 19. As districts get larger, it is imperative that delegation of purchasing authority be granted to specialized personnel. 20. Advantage should be taken of discounts by prompt payment. To do so beyond the authorized period, however, is poor practice. 35 Bidding Procedures 21. Bids are to be solicited by whatever media will encourage competitive prices. 22. Making supply bid awards can best be done on the basis of total considerations, with the lowest quotation for each item the major factor. 23. Purchase orders are recommended wherever practicable. 24. While purchase orders are recommended, it may be found that the cost and time requirements for their use with small pur- chases is proportionately high. In such cases, other means may be more economical and feasible. 25. Competitive bidding is necessary in volume buying to insure that the lowest prices are obtained. 26A. It is recommended that written bid invitations go to a minimum of three vendors. 26B. An important part of the written bid invitation is a statement giving the board the right to reject any and all bids. 27. Any vendor is entitled to submit a quotation if he is considered to be qualified. ‘ 28. Bidders are entitled to attend bid openings. Their presence is to be encouraged. 29. While there are exceptions, the supply bid period is generally two to three weeks. 30. Requesting that samples be submitted with quotations is good practice because they help clarify items quoted, and can prevent problems that might develop later. Cooperative Purchasing The questiomsin this area were posed to determine the extent of its practice, as well as its reported advantages and dis— advantages. There are no ultimate criteria for cooperative pur- chasing other than those determdned by each participating group. CHAPTER III THE LEGAL,ASPECTS OF PUBLIC SCHOOL PURCHASING IN MICHIGAN SOURCES CFjAUTHORITY'AND RESPONSIBILITY The legal basis for purchasing may be found in state statutes, the state school code, rulings of the state's attorney general, and court decisions. In addition, administrative law, in the form of rules and regulations of agencies such as the state or local boards of education, has the force and effect of law. Education is a responsibility of the state, which has delegated most of it in turn to local school districts. This ac- counts, in great part, for the dearth of a substantial body of binding provisions at the state level. 'While the adoption of a new Michigan state constitution in 1964 enlarged and extended the powers of the State Board of Education, the emphasis of its powers remains advisory and of a service nature, rather than regulatory. The legal status of the school district thus assumes imp portance. Gerber states that having derived its powers from the state, it exists as an agency of the state. As a quasi-municipal corporation, it is largely governed by those legal principles that 36 37 are applicable to the state, not those applicable to municipal cor- porations such as cities, towns, or villages.1 As legally charged agents of the school district, the local board of education has onlytmat power invested in it by law and whatever may be implied therefrom. The extent of such power, as it applies to purchasing, is circumscribed by Singer in the following legal principles: 1. A school board cannot delegate its discretionaryauthority to an individual. ' 2. A school board‘s authority to contract (purchasing is a contract) must be found in the statute and such authority is limited by the statute. 3. A party dealing with a school board is presumed to know the law with respect to the limits of the board's authority to contract. 4. Courts generally refuse to enforce an illegal contract. 5. In general, a school district will not be held liable under an express contract that is illegal even though the other party fulfills its part and the school district retains the benefits. . 6. Partially completed contracts such as purchases made by an individual with or without the knowledge of the school board, may subsequently be ratified by it, providing the act was one for which the board had the authority in the beginning. 7. One who signs a contract for a school board may be held individually liable, unless in the body of the contract it is made clear that the signer intended to bind the board.2 1Lee 0. Garber, "Legal Problems Involved in Purchasing," Association of School Business Officials of the United States and Canada, Proceedings of the Convention, (Evanston, Illinois: The Association, 1959), p. 153. 2H. Halleck Singer, "Authority of Boards of Education to Delegate Their Discretion in Matters of Purchasing," 1963 Yearbook of School Law, by Lee Garber, (Dansville, Illinois: Interstate ‘Printers and Publishers, Inc., 1963). p. 225. 38 ELEMENTS OF.A CONTRACT Because the foregoing indicate that the board's activity in purchasing is basically a contractual one, it is relevant to define "contract" and indicate its elements. In stating the essentials of a valid contract Ritterskamp, Abbott, and.Ahrens say: A contract is an agreement between two or more parties wherein each by their mutual promises assumes an obligation. To be valid and enforceable, a contract (1) must be made by competent parties. Competency implies sanity, sobriety, legal age and, in addition, the necessary authority if agents are involved. (There must always be an agent to act for a corp— oration.) (2) Must involve a legal subject matter. (3) Must involve consideration. This is no problem in purchasing, since the buyer‘s promise to pay and the seller's promise to deliver goods or services meet the requirement of mutual consideration. (4) Must involve a meeting of the minds of the parties. This is the agreement—-the understanding between the parties of their mutual promises and undertakings. It must be clear and unequivocal. A valid contract may be oral or written, formal or informal.3 The last point made, that regarding the validity of oral or written contracts, is of major importance in purchasing, as indicated by Gray: You can leave a lot unsaid and still have a valid contract, but if you omit important elements such as price or quantity, He sure you provide a method for determining them. A definite price is not needed to maintain a valid contract. But failure to set forth standards or methods by which the price can be as- certained, makes enforcement impossible.“ '3Ritterskamp,.Ahrens, Abbott, op. cit., p. 135. IAlbert Gray, "How Vague Can Your Order Be?" Purchasing, 53:53-55, 85, July, 1962. 39 CONSTITUTIONAL AND REGULATORY REFERENCES TO CONTRACHS The Federal Constitution, Article I, Section 10, Item 1, states: No state shall . . . pass any bill of attainder, ex post facto law, or law impairing the obligations of contracts . . . . This provision of the Constitution has frequently been applied to settling controversies between states and colleges or universities over contractual provisions of charters and to controversies between teachers and governing authorities over tenure and retirement rights. The Supreme Court has held that "a legislative enactment may contain provisions which, when accepted as a basis of action by individuals, become contracts between them and the state or its subdivision . . ." Thus, the Federal Constitution itself provides substantial control over the actions of the states and boards of education insofar as those actions involve the impairment of obligations under contract.5 The new Michigan Constitution, effective January 1, 1964, contains the following provisions regarding contracts: Article I, Section 10. No bill of attainder, ex post facto law or law impairing the obligation of contract shall be enacted. Article II, Section 21. No person shall be imprisoned for debt arising out or founded on contract, express or implied, except in cases of fraud or breach of trust. Article IV, Section 10. No member of the legislature nor any state officer shall be interested directly or indirectly in any contract with the state or any political subdivision, thereof which shall cause a substantial conflict of interest. The legislature shall further implement this provision by appropriate legislation. 5 E. L. Morphet, Roe Johns, Theodore Reller, Educational Administration: Concepts, Practices, and Issues (New York: Prentice Hall, Inc., 1959), p. 171. ' 40 STATUTORY.AUTHORITY School district boards of education under the classification and organization of the School Code of 1959 have the general power, authority, and duty to provide necessary equipment and apparatus, and to do all things necessary for the maintenance, prosperity, and - success of the schools of the district. The following excerpt from the code is illustrative: (109) P. 340.154 Same: body corporate: powers. (Second Class) . . . Said board shall have power to purchase all property, erect and maintain all buildings, purchase all personal property, ems ploy and pay all persons, and do all other things in its judg— ment necessary for the proper establiShment, maintenance, management and carrying on of the public schools of the city and for the protection of other property of the district,amd government and for the control and management of all schools, school property and pupils . . . . COURT DECISIONS Of fundamental importance_in understanding the relation of the courts to the local school board is the principle that the courts will not interfere with a decision of a board of education in an area in which the board has power to act unless it can be shown that the board abused its discretion, according to Hamilton and Reutter.6 Authority to purchaSe broadly is the general inter- pretation by the judiciary, so long as the matter is part of the regular educational program, and not in the nature of unusual servflzes. 6Robert Hamilton and Edmund Reutter, Legal Aspects of School Board Operation (New York: Bureau of Publications, Teachers College, Columbia University, 1958), p. 7. 41 In Knabe v. Board of Education of West Bay City, 1887, the Court said, "When the law gives the board of trustees power to prescribe the course of studies it gives them authority to provide means to carry the power given into effect." The following Michigan cases illustrate and clarify the cor- porate nature of school districts as stated in Section 352 of the 1959 Michigan School Code (Act No. 269, P.A. 1955). School districts are municipal corporations capable of suing and being sued and of contracting and being contracted with. waterman4waterbury Co. v. Cato School Dist. No. 4, 183 Mich. 168. The public school district of the City of Battle Creek is a state agency created by law to carry forward the educational policy of the state and derives its power and authority from the constitution of the state. Public Schools of Battle Creek v. Kennedy, 245 Mich. 585. The officers of tOwnships, counties and cities have no control over the officers of school districts. Board of Education of Detroit v. Campbell, 256 Mich. 350. Term."school district" is commonly regarded as legal division of territory, created by state for educational purposes, to which state has granted such powers as are deemed necessary to permit district to function as a state agency. Board of Educa— tion of Detroit v. Superintendent of Public Instruction, 319 Mich. 436. School districts and school officers have only such powers as statutes expressly or impliedly grant to them. Foster v. Board of Education of School Dist. No. 10, Delta Tp., Eaton County, 326 Mich. 272. 42 .SIBTE.ATTORNEY GENERAL'S OPINIONS Opinions rendered by the Attorney General provide numerous guidelines for local school boards. For example: School districts are not liable for special assessments for local improvements, nor may the districts validly contract for payment of such special assessments.7 Following are examples of opinions which bear on conflict of interest by Board members: School contracts of purchase of supplies from a dealer who is also a member of the board of education, are void.8 Members of the board of education must not be interested in contracts with the district. This, however, would not pre- vent making of a contract with the wife of one of the members of the district board with reference to her separate estate in which the husband has no interest.9 The conflict-of-interest issue is also clarified in the School Code: It shall be unlawful for any member of a board of educa- tion to perform any labor for the school distribt except as provided in this act, or to sell or to rent any material or supplies to the school district in which he is a member of the board: Provided, That this section shall not.prohibit busi- ness transactions with corporations in which the board member owns less than % of the stock; Provided further, That nothing in this section shall prohibit any board member in a school district of less than 4,000 population from making total sales in any school year to the school district in the amount less than $500.10 ' 71926-28 Opinions of the Attorney General 688. SAttorney General's Opinion, June 26, 1928. QAttorney General‘s Opinion, August 26, 1933. 10Michigan School Code, 1959 (547) 9. 340.969. 43 It is clear that each of the sources discussed has con- tributed to the contractual authority of school boards. Docu- mentation of the many problems related to contracts may be found in one or several of the sources cited. COMMON CONTRACTUAL PROBLEMS Foremost among such problems is that involving ultra-vires contracts, those beyond the authority of the board to make. This applies to contracts falling outside the area prescribed by statute. Edwards'says: According to the great weight of authority contracts which a school board had no authority to make are void, unenforceable, and without effect. On such contracts a school board is not ' liable in a court of law even though the contract has been per- formed by the other party and the board retains the benefit of the performance. Nor does it matter that the school board it- self thought it had the authority to enter into the contract involved and so represented it to the other party. The authority of a school board to contract is an open book; it is to be found in the statutes and court decisions of the state; all who deal with school boards are required themselves to judge of its powers; and if they misjudge its powers they must suffer the consequences. In refusing to hold a board or a school dis— trict liable on an unauthorized contract, the courts reason that the local school corporation is an arm of the state vested with such contractual powers as have been conferred upon it and no others; in making contracts it is spending public not pri- vate funds; and all who deal with it are supposed to know the law and to judge for themselves the measure of authority the state has conferred upon it.11 The situation involving possible ultra-vires contracts is not clear. It has been said that one who deals with a district is a volunteer. That is, he is free to deal or not as he chooses and is bound at his peril to know that its contractual authority is not 11Newton Edwards, “Contractual Authority of School Boards," Law and the School Business Manager, Lee Garber, editor (Danville, Illinois: Interstate Printers and Publishers, Inc., 1957), pp. 31—2. 44 exceeded.12 It is usually held that contracts in excess of the constitutional debt limit, those let contrary to a statute requiring competitive bidding,and those requiring a vote of the district are ultra—vires.13 Linn observes that the competitive bid requirements are designed to protect school funds and insure that districts will get the most for their money. As prices continue to rise, a greater number of school contracts will fall under the competitive bid requirement.14 Outside of contracts involving the school plant, the mone— tary limitations on competitive bids for purchasing in Michigan schools appear to be established at the local level. Oosting found that the limits were placed by the city government or by the board of education rather than by the state, for equipment and supplies. Restrictions were not on the amount but on the manner of purchase.15 The degree to which changes may be made in contracts let on competitive bids poses a problem. If the changes are too extensive, than the bidding value is lessened, but if no changes are permitted, it means cancelling the bids and readvertising with new specifications. 12Robert R. Hamilton and Paul R. Mort, The Law and Public Education (Brooklyn: The Foundation Press, Inc., 1959), p. 304. 131-lamiltonmd Mort, op. cit., p. 305. 14Linn, op. cit., p. 534. 15 B. R. Costing, "Legal Limitations on Buying," The Nation’s Schools, 6:61-2, July, 1957. 45 Hamilton‘md Mort say that a certain flexibility is permitted if the changes are not so great as to amount substantially to abandoning the original contract and entering into a new one.16 DELEGATION OF AUTHORITY In speaking of the legislative, judicial, and executive func— tions of the board of education, Roach says that "it may properly delegate its executive (or administrative) authority--but not its legislative or judicial powers-~to agents acting on its behalf."17 In all cases, however, where authority is delegated, the board is not relieved of its responsibility. The corporate nature of the board precludes divesting itself of its duties. There is no enumeration in Michigan law, of procurement duties for the local superintendent, hence it raises the question of his authority to purchase. Edwards says: A board may authorize its superintendent or business manager . . . to make.investigations and even to enter into negotiations . . . but no agreements or understandings reached in this manner will constitute a contract unless they are confirmed by the board in a duly executed contract.18 Authorities agree that a board would have to be in almost continuous session in order to approve all purchases. In a realistic view of this problem, Singer says: 16Hamilton and Mort, op. cit., p. 299. 17Stephen F. Roach, "General Authority of School Boards,“ Law and the School Business Manager, op. cit., p. 12. 18Edwards, op. cit., p. 27. 46 There is a possibility that some persons might argue that there would be no harm in designating individuals to make small purchases for the schools while reserving large purchases for action by the school board. It appears, however, that the size of the purchase does not alter the problem. A review of court cases seems to indicate that the authority to purchase is a matter of principle and not of amount. If a school board can- not delegate authority to an individual to purchase a school bus, then it is probable that authority cannot be delegated to purchase a typewriter or, for that matter, if one is tech— nical, to buy a gross of pencils. In consideration of the many purchases which a school district must make, a large share of which are minor in nature, it seems that efficient business operation requires delegation of purchasing.19 In practice, local boards commonly limit authority of the purchasing agent to a specified monetary maximum. .A second authoriz- ing feature, in addition to the size of purchase, is the common practice of making purchases prior to approval. Ratification of such purchases, according to Singer, is a perfectly legal procedure. Subsequent approval by the board accomplishes the same purpose as thoughthe board had given prior approval. This does not constitute delegation of authority, however.20 The problem created by pur- chase prior to approval is the lack of contract status of items delivered and in use before their purchase is ratified. 19Singer, "Authority of Boards . . .,“ op. cit., p. 224. 201bid., pp. 233-4. 47 ,SUMMARY The local school board has the major responsibility for school purchasing. It cannot legally delegate its judgmental authority. The courts, state statutes, and state attorney general's opinions have all contributed to defining the limits of the board's authority. In spite of this, there remain areas that are not' clearly defined. Some illegal practices, such as ultra-vires contracts and granting of authority, are in effect only because they have not been challenged. ‘It is basic that the board by-laws be legally sound. The concensus of legal authority is that the local board may, establish any-pelieiesaand procedures to promote the district‘s educational welfare, so long as there isruaviolation of the existing statutes. CHAPTER IV PURCHASING INSTRUCTIONAL SUPPLIES IN MICHIGAN PUBLIC SG-ICDLS: FINDINGS AND SUMMARY mmonycnon Subject Area Covered This chapter presents the current practices for purchasing instructional supplies in Michigan public schools. The survey was conducted by means of a questionnaire (see Appendix B), constructed so as to encompass four aspects of purchasing: general considerations in determining needs, establishing quality standards, selection of sources of supply, and bidding procedures. Also included was a section on cooperative purchasing, to determine the extent of its practice. School District Categories All Michigan public school districts having a superintendent were polled. In classifying districts by size, an arbitrary scale was created, the purpose of which was to enable comparisons to be made with some degree of uniformity. At the same time, it was desirable to determine whether substantial differences existed between adjacent official size classifications. The smallest districts 48 49 having a superintendent are those of the fourth class whose member- ship extends up to 2,400. Because of the large number of districts within this class, they were split two three equal groups of eight hundred each, thus providing an opportunity to make comparisons as they approached the 2,400 breaking point. Third class districts, with membership ranging from 2,400 to 30,000, were split somewhat differently. It was recognized that purchasing practices associated with volume buying and personnel specialization were utilized long before the district reached 30,000 members. .Accordingly, an equitable division was made of three classes between 2,400 and 20,000 membership, plus one category over 20,000. A tabulation was made of all reporting districts below and above the 2,400 membership figure, prior to de- termining the number and size of each category so as to make the classification as equitable as possible. The survey returns are shown in Table 1. Table 1. Response to Questionnaire on School Supplies Number of Number of Per cent of Membership Districts Returns Returns 800 or less 187 148 79.2 801 - 1,600 163 138 84.8 1,601 - 2:400 86 67 77.9 2,401 - 8,000 132 103 78.0 8,001 - 14,000 l9 16 84.2 14,001 - 20,000 9 7 77.8 over 20,000 8 6 75.0 Totals 604 485 80.3 50 Collectingand,Arranging Data The data on each questionnaire were entered on punch cards, which with the appropriate program and parameter cards, were then computer-processed at the Michigan State University Cbmputer Center. The Analysis of Contingency Tables (Act II) for the (DC 3600 was the program used to perform the analysis of the data. Responses to the questions were used as the control variable, and the seven membership groups served as the spread variable. Observed frequencies, percentages, and product moment correlations were computed for all responses. Graphic Presentation The percentages of different responses among the seven sizes of school districts are presented in graphic form. The advantages are twofold. First, trends are immediately detectable, and patterns lend themselves to more prompt interpretation. Second, they are more readable and usable by the practicing administrator. By identify— ing his own district's size on the horizontal scale,£nd striking a vertical line from that point, he can compare his practices, per- centage-wise, with other districts. The per cent of the total districts making a particulan response is shown in parentheses adjacent to the line representing that response. 51 Percentage totals may exceed 100 per cent where there are multiple responses, or be less where there was no response. In the latter case,for example, small districts would not respond to ques— tions regarding competitive bidding if they do not practice it. Included with the graphically—recorded response to each question is a recognized criterion. (Page 6 indicates how the criteria were established.) The significance of the presentation is found not only in inter-group comparisons, but with the recommended standards as well. Where actual practices showed a correlation (r) above .20 with district size, they have been recorded on the graphs. Intermediate School Districts This chapter also presents data on the intermediate districts. A questionnaire was constructed (see Appendix C) to obtain information in three areas: how the intermediate superintendent perceived his role in purchasing for all the districts under his jurisdiction; the degree of primary—district purchasing by the intermediate office; and the extent ofcooperative purchasing within each intermediate district. From the seventy-seven questionnaires distributed, sixty-four replies were received, or 83.1 per cent. These intermediate district responses, in shedding light on their purchasing role, particularly with primary districts, supplement the findings from the individual districts having superintendents. 52 PRESENTATION OF DATA Individual District Questionnaire The graphs that follow are in the sequence provided by the questionnaire sent to individual districts. The graphs are, in varying degrees, self-explanatory. Accompanying them are observations based on the percentage trends shown. Further observations are in- cluded in the summary. Intermediate District Questionnaire Following the graphic presentation on the practices of indivi— dual districts, the findings from intermediate districts are presented in tabular form, with relevant commentary. PER CENT 53 Qucstion l — Are your purchasing policies in writing? fh‘itori(n1 - kh‘ittcn 1X111C1OS anx> basic tx)£3 sound 1NJrchasirn; proprann Figure 1 shows that more than half of all districts employ— ing; a superintendent have no written purchasing policies. Of lhoso districts having written policies, the grcatvr number provide only guixhrlincs. As chhstricts ineliwuu‘ in size, £3 larger prr‘(xu1t of them have their policies in writing. (an: a. / £50 Enougfi (or d gut (dd (37.5 2.) 40 210 ‘, I‘ ’ ’ I ’ .Qflfl‘flv I 9 ’ o‘\ / I. (4'3 70)-.“ ”’- ‘ ‘ ‘ / . 0 a 800 I600 24 00 8,000 14,000 20,000 ' 20,000+ MEMBEESH/P Figure 1. Per cent of Districts Having Written Purchasing Policies 54 Question 2 - Who determines what instructional supplies are used? . . O. . . Criterion - Item selection can best he made'when It IS a coopera— tive affair, one which includes users. As shown in Figure 2, selection by users declines as the dis— tricts get larger. It thus appears that the larger the district, the less influence the teacher has. Individual determination in the smaller districts is replaced in some degree by group determination in the large districts. [00 £30 .. [dinating ,”\ ., / I \\ InleleJ/ \ a 60 . ‘ ’ ; , ‘i” 40 ' Zo .. COMMI‘ff'“ (08.2 7;) W. r0000-060000010O00000 ..... Q. 0 Boo I600 24 00 8,000 14,000 80,000 20, 000 + flfl9V&BaWWP Figure 2. Who Determines What Instructional Supplies Are Used Question 3 — Do you issue printed instructions renarding use of suppliesf Criterion — Printed instructions for supply users are important as a means of obtaining optimum utilization. Less han five per cent have written instructions CUYL‘I.‘iIlp, all subjects. Three out of five schools have none, except in the largest districts. This may reflect a need for Controls becausv of volume in the large districts, as well as an attempt to over- come the greater communication gap, ’ (an: A 80 ’ I N a U Lu 40 R ‘ , - K \ . ‘p ’ I ’ L‘ \ \ ... / I \ ‘ ’ 4’ Y o N. ‘.- ’ es, cone-c g SOMC $141.4]: (3&0€Z) 2Z0 0 800 1600 ‘- 24 00 8,000 14,000 20,000 20, 000 +- MEMBERSHIP Figure 3. Degree to Which Printed Instructions are Issued for the Use of Supplies 56 Question 4 — Does your district charge a fee for workbooks? Lab- oratory nmterials? Classroom supplies? Criterion - Charging fees for regular instructional supplies is not good administrative practice. Figure 4 shows a lack of correlation between fees charged and district size. This may be a reflection of the grouping of random wealth of districts. Those with relatively high ability to support themselves locally may tend to do so, while poorer districts may tend to charge. The law is silent regarding the charging of fees. [00 8° /\ Wor-Kbe; (76.0 7.) / d\ I \ \ N A / W ‘ ‘ ... I 60 / L6‘+hrLMJfOI'QIS ~ 3 i4, / (57.! '7.) \ \ / 45 0 PER CENT \ \ CIJ Stroon‘t suff ,I'QS o ..Ouooo-o....& .....o.° (23"2)‘ ~- ...-.....q.‘. .... O... 20 “ "a .‘Q '0. ..1 Rs“, I 0 800 I600 24 00 8’0 00 14, o 00 20,000 20, 000 + MEMB/aes HIP Figure Ll. Per cent of Districts Charging Fees for Workbooks, Laboratory Materials, and Classroom Supplies [0c PE? (IE/V7— 57 Question 5 — ls administration authorized to make purchases within prescribed limits? Criterion - Greater efficiency is promoted when administration is given latitude proportional to district size in making decisions regarding expenditures. Figure 5 indicates that it is general practice to place res- trictions on authorized expenditures. Authorities agree that some latitude may be given, since control is maintained through regular board action plus the required annual audit. They recommend that Control be a matter of method rather than money. £30 Va, Mb}. «I: Maw ‘Udgel’ (64. 3 7) £50 «‘\‘~“~ ’\ / \ / \ , _ /’ YE§,auf£0x nkvwnnun ,/ ‘\- ‘?0 éhnpunt' (3L8WZZ'IA \ /.\ \ / \ / / \ ‘ .4 / s ~ \~ / / 230 O 800 I600 24 00 8,000 14,000 20,000 20, 000 +- /‘//E/‘78£'€5 H/ P Figure 5. Authorization of Administration to Make Purchases Within Prescribed Limits 58 Limitations on Admdnistration Boards are careful to insure that administration works within the budget. ,As a secondary control, a dollar limitation is often placed on expenditures. The limitation amount by district size is shown hi Table 2, which indicates that as districts get larger, so does the authorized limit. .A sharp contrast to this trend is found in CA) and (B) of the table. The seven (A) districts reported either that there was no limit on the superintendents, or that he could use his own judgment. The lone (B) district reported a limitation of $10.00. Table 2. Number of Districts Reporting.Administrative Purchasing ' Limitations, by District Size Dollar Maximum District Membershi Limitations 800 1,600 2,400 8,000 15,005 20,055 20,000+ $1000 and over 2 7CA) u s 2 2 2 $500 - 999 12 11 12 17 u 1 $300 - 499 2 3 2 2 1 $200 _ 399 7 6 2 a $100 - 199 9 7 3 Less than 100 8 3 1 1(3) 59 Question 6 - When is the appropriation balance for the purchase of . supplies known? ' ' Criterion - It is important that the supply appropriation balance be known at all times. While almost the same percentage of the smallest and the largest districts know their balance at all times, Figure 6 shows that there is a decline which reaches its lowest point in those districts between 1601 and 2400. This may be the point where the district has become too large for manual bookkeeping, but too small to put in a modern bookkeeping system. [00 Manfély k E Lu (45.67.) /\ U oz \ 5t k‘ Afallhh-ds ,JL"”” ‘~~.../’ \ \ (35:8 70) / \ \ / , \ m / 0 800 I600 24 00 8,000 14,000 20,000 20, 000 *- MEMBERSHIP Figure 6. Frequency With Which Supplies Appropriation is Known [cub PE? CENT 60 Question 7 — May some purchases of supplies be made from a petty cash fund? Criterion — Within proper controls, petty cash saves time and money in small and emergency purchases. Figure 7 indicates that the greater use of the petty cash fund by larger districts may indicate more frequency due to greater volume. Non-use by the largest districts for small purchases could mean that it is replaced by confirming purchase orders, thus pro— viding a common vehicle for all regular purchases. / 630 ,Ill 1’ /’ / / 50 ’ , , 52.6%) / T Yea; for emery nclr'cs L(39.473) / "\ 40”: ‘k‘\‘-~_____.Jl N0....L(.z0.47o) .._.L 20"” ., .fi “““ ”Huh --"' '- ..‘O. . 800 /600 24 00 8’0 00 14’ o ac 20,000 20, 000 +- MEMBEQS HIP Figure 7. Degree of Usage of Petty Cash Fund 61 Question 8 — How extensive are your specifications, i.e. are they in writing? Are all items included? Must they be abided by? Criterion — Good business practice calls for specifications that are in writing, that include all items, and must be abided by. As might be expected, Figure 8 indicates that written speci- fications are developed as districts increase in size. Larger dis- tricts also show more adherence to specifications. to the requirements of competitive bidding. districts allow more personal choice. lhis is related Conversely, smaller [Eng 80 Tire, are m an- msg#34221») <50 PER CENT 4o ,1 They ma}; Le. .- 'O. ‘ ahued 6‘, 0'... ’- a- "' " H093 z.) ' I / ,7” mm, 20 ..- . -" x if: included .‘.-< ...... .../I 059%) \ \ 2‘73" "" .— \ 1 0 800 I600 24 00 8,000 14,000 30,000 MEMBEESH/P ”Figure 8. General Features of Specifications 62 Question 9 — How complete are your specifications? 0 Criterion — Supply specifications vary according to the complexity of the item. A brief description is recommended as minimum positive identification. Figure 9 shows that a brief description is host often used for supply specifications. While supply items generally don’t require the full description required for equipment, specifications assume more importance in volume buying. [00 Brier 9"":fii7n 3 .3 . 40 / ) / \/ . / Full oer-{fhuot . ' ' ' O O. . . \ 2,. [‘7 .... ‘- ,'.. 20 \ \ .... .‘v. I“ ‘\ ”V/’”0c> ékyOCKJ .chnx94- MEMBEEJ‘H/P Figure 31. Reasons for not Participating in Cooperative Purchasing 86 Question 33 - Do you now purchase any instructional supplies cooper— atively? Figure 32 indicates that participation is significantly greater in middle-sized districts. That cooperative purchasing is currently practiced in urban areas would indicate that geographic location is a major factor. A tabulation showed that the average length of time that districts have participated is 3.1 years. [6ND £30 <50 ”5(252270 (I22. J13 l'rlcl'.‘ \ PEI? CENT 800 I600 24 00 8‘0 00 14,000 20,000 20, 000 + MEMBEEJHIP Figure 32. Extent of Participation in Cooperative Purchasing 87 Question 34 — What do you estimate is the approximate per cent of savings? Figure 33 shows that the most active districts report less savings. records. In the absence of time and cost studies, of the estimate must be limited. [00 This may be due to wider experience and more complete interpretation £30 lg 50 N U 9540 Q. ‘20 ;’/‘~ leelhmwmglbzzaeh /’ ('10 7') __, / / b‘.‘ O Boo /6oo 24 00 8,000 14,000 20,000 M£M8£e5mp Figure 33. Estimated Per cent of Savings 20,000 + 88 Question 35 — What have been the advantages of cooperative purchasing? In Figure 3h, two out of five of the most active districts claim that lower prices and improved standards are the major advantages. Also mentioned as benefits by the total number of participants, but not shown in the chart, are savings in time (12.4%), more understand— ing (6.4%), and more vendor service (1.9%). (cu: L cover '72: cs 624.5%) ’ dis 20 / 7L , ‘ , \\ //fmfwoved :f‘an'J‘ \tfi’ ’ __ ..r (9.7 7.) \ -- "" .... A ‘— \ :4 0 800 1600 24 00 @000 14,000 20,000 80, 000 + ,MEMBEIQS‘H/P Figure 34. Reported Advantages of Cooperative Purchasing Question 36 - What have been the problems in cooperative purchasing? 89 Figure 35 indicates a low incidence of problems. Since the program is voluntary, participants can be expected to find more satisfactions than problems. Other problems reported, but not in the chart, are insufficient savings (1.970), and lack of time (5.6%). lack of interest (2.7%), and organizational problems £0,000 4- N (CH: 630 1\ 60 E Lu U 8‘5 40 K , .. Lot: ofmJAm/u/ Jr'sf'rr'cf‘frtrfcreqce: (Bdlfiz) ’ — / .20 z’ / ‘\ greet-141% \ h- — — —— [has GSTICCf I‘ll. \ o (7 07.) N £300> emu: ga4cmo (Bocxa L4¢>0c» ékacxa MEMBERSHIP Figure 35. Problems Reported in Cooperative Purchasing 90 Question 37.~ How are supplies distributed? Figure 36 shows that as the number of participating districts increases, there is a greater tendency to make deliveries to only one point in each district. It is valid to assume that vendors would find this necessary in order to maintain their profit margin. The question then becomes one of how much actual savings are realized when distribution to individual schools is made by school personnel. (on: 0\ Q ~13 0 PE? CENT one Je/z'vem/ fainf .2. ea cl. Jam‘s \ , 00.9 '7.) \ zio u”"‘ ‘\ / ’ per...- \ ...._.’ / c6 36100 \ . '\ O , , (9-’ ‘7) . 800 [600 24 00 8’0 00 14, o 00. £0,000 zq 000 + MEMBERS H/P Figure 36. Number of Vendor Delivery Points 91 Data From Intermediate Digtricts As indicated in Table 4, almost three-fourths of the inter— mediate offices do not purchase for their primaryéflstricts. Ihble 4. How Much Purchasing the Intermediate Office Does for Primary Districts Function Performed by Number of Intermediate District Responses Per cent None 45 70.3 Perhaps supply lists 7 10.9 Consolidates requests 5 7.8 Obtains prices 7 10.9 Issues purchase orders 8 12.5 Other 9 14.0 The other functions referred to in Table 4 include procure— a ment of the necessary administrative supplies, such as class records, attendance books, report cards, and tests. A number of intermediate superintendents pointed out that their office performs this service as part of their organizational program. In order to clarify the high percentage of non-activity by the intermediate office, it is helpful to recognize the disparity in the statewide distribution of primary districts. Consider the following: Thirty-six per cent of the intermediate districts have five or less primary districts. Fifteen of the seventy-seven intermediate districts contain over half of all the primary districts. ' 92 On the basis of this information, it can be seen why most primary districts do their own purchasing: their scarity, together with their small supply budgets and the geographic distances between them, do not appear to warrant efforts by the intermediate office. This is confirmed in Table 5. Table 5. Reasons Reported by Intermediate Districts for not Doing any Primary District Purchasing m Reason Given Number of Per cent ~Responses Distance between districts 6 9 Lack of uniformity in district size - 4 6 Lack of interest 20 31 Other (the majority of these are the 21 33 absence or scarcity of primary dis- tricts) The small purchasing power of each primary district may make it economically unfeasible to involve the intermediate office, where there are only a few primaries in the intermediate district. The other major reason given for non-participation is lack of interest. Miscellaneous reasons include lack of storage facilities, each district wished to do its own purchasing, and shortage of personnel in the intermediate office. 93 Thirty—four of the intermediate districts, or fifty—three per cent, have attempted to organize local districts for cooperative purchasing. At present, thirteen of the intermediate districts, or twenty per cent, are participating incooperative purchasing of. instructional supplies with districts larger than primary. Of this group, the average has been with eight districts for a period of five years. There is a consciousness of cooperative purchasing among those intermediate superintendents who are not currently engaged in it. Several like the idea and spoke of exploring its possibilities, this year.. Perhaps one reason for their interest is the fact that in fifteen counties there are currently operating cooperative pur- chasing programs that are not related to the intermediate office in any way. Participation in cooperative purchasing, as well as attitudes toward it, provide an indication of how intermediate superintendents perceive their role. The majority see themselves as consultants. On this basis, they encourage initiative on the part of districts within their jurisdiction. Exceptions to this were found in certain urban areas where the intermediate superintendents activity sought to increase economies for all their districts. Others favor aid to the smallest districts by consolidating their requests and doing the purchasing for them. Results of the question on their attitudes are shown in Table 6 . 94 Table 6. What Intermediate District Superintendents Believe Should Be Their Functions, as far as Cooperative Purchasing is Concerned Function Number of Per cent Responses To encourage all districts to do their 2 3.1 own purchasing To help all districts on a consultant 41 64.1 basis To help the smallest districts by 18 28.1 consolidating requests To do the purchasing for all districts 15 23.4 served by the intermediate office Other 8 12.5 Among the other aspects of how the intermediate superintendent perceives his function, the most frequent attitude is that if their districts desire, the intermediate superintendents are willing to help. Several expressed this thought, while others said they would appreciate leadership from the Department of Public Instruction. The majority appear to believe the initiative should be taken by others than themselves. 95 SUMMARY OF FINDINGS Introduction This chapter presented data relative to purchasing practices in 485 of Michigan’s 604 school districts having a superintendent. Data were also presented from.sixtysfour of Michigan's seventy-seven intermediate school districts. Validationand clarification of the information gathered were provided by written and oral communications with a sample of superintendents. The viewpoints of the two major school suppliers were also included for points of agreement and dis- agreement. Summary of Individual District Practices Commonality of practice among the seven categories of dis- trict size has been shown graphically. The observations that follow are not exhaustive but seek to summarize the degree of usage of each practice. Further observations can be made by a district‘s personnel, upon compariskn of their own practices with those of others in the same size group as well as with other groups. Written purchasing policies — The majority of districts do not have written policies, but the per cent increases as districts get larger. It is possible that in smaller districts, because of less purchasing, such policies are considered unnecessary. 96 Item selection -.Administration determines, in three-fourths of the districts,what items will be used. Although individual users make their own selection in smaller districts, this practice is re— placed by committee decisions in the larger districts. This appears to support standardization as volume buying becomes greater. Printed instructions for use of supplies — Supplies may be squandered by some teachers, hoarded by others. The purpose of written instructions is to provide adequate but not excessive quant- ities. Since the majority of districts furnish no instructions, it may be interpreted to mean that they do not consider this a major problem. Charging_fees - A basic question in this area is the legal right to charge fees. .A distinction may also be made between charg— ing for laboratory materials, e.g. broken glassware, and for classroom supplies or workbooks. Why three times as many districts charge for workbooks as those charging for classroom supplies, may be related to the relatively higher cost of the former, but there is no valid legal distinction between them. Limitations on administration - Budgetary control is more extensive than control by a maximum dollar amount. The two means of control complement each other. 97 When the appropriation balance is known - Only one of four districts knows its appropriation balance at all times. 'Much can'be done to correct this, by adoption of modern accounting practices. Purchasing fromLpettypcash — Half of the districts use petty cash for small purchases. Two out of five districts use itrfor emergencies. It is assumed that the remaining districts utilize open accounts and/or purchase orders. Since petty cash is convenient and economical, its use within a written policy can be greatly extended. Extensiveness of specifications — While only fifty—four per cent of the total districts have written specifications, their use increases with district size. This corresponds to more standardi- zation and formal bidding procedures. Only one-sixth of the districts include all items, however, indicating that personal preference may still be a major characteristic in determining which supplies are purchased. Supporting this, only one district in five requires that the specifications-be adhered to. Completeness of specificatirns - Adoption of a brief descrip- tion parallels district size increase. Conversely, the personal preference of the user disappears in the larger districts, reflecting more standardization. One—fourth of the districts report use of a full description. The distinction between a brief anla full des— cription is relative, depending onthe detail considered necessary for positive identification. 98 Sources used in preparing specifications - Catalogs and the suggestions of users are both used by three-fourths of the total dis— tricts, but their influence declines in the larger systems. The in— fluence of saledmen increases up to the largest districts, then drops drastically. It appears that in districts over 14,000 formal bidding diminishes the effect of catalogs, as well as user suggestions. writing specifications - Both administration and committees are used more as districts increase in size. The former, however, has the responsibility in three-fourths of the total districts, while committees have it in only one of five districts. Standardization of sppplies - This is more prevalent in larger districts and is practiced by all districts over 20,000 membership. It thus reflects the more impersonal and formalized purchasing p structure. Preference for local vendors — Three of five districts report such preference. The practice is rather consistent among all sizes, having a total range of only twelve per cent.- Service is the major reason given for showing preference. Maintaining a list of qualified vendors —.As districts get larger, a higher proportion of them have such a list. This is partially due to necessitys since they utilize more vendors, as indicated elsewhere in this summary. 99 Keepipg bidding records - Findings parallel those of the previous question, except in districts over 20,000 membership. The trend reflects the more specialized purchasing organization in larger districts. Number of supply vendors - Fewer vendors are used in small dis— tricts, as would be expected. Five of six districts have ten or less vendors. Only in districts over 8,000 does the number of suppliers increase beyond ten, reflecting a more specialized curriculum. Location of most frequently used vendors - The major school suppliers reach a higher per cent of districts in the middle range (2,400 to 14,000 membership) than they do in smaller or larger sys- tems. In total districts, they deal with almost fifty per cent. Local vendors are more frequently mentioned as districts get larger, indicating that there are more of them available. How most instructional supplies are purchased.- This aspect of the purchasing process is shown to be closely related to dis- trict size. As competitive bidding gains prominence, the influence of salesmen and catalogs steadily declines. Title of_the person responsible for purchasing - As with the previous question, the difference that district size makes is clearly shown. As district size increases, there is further delega- tion of authority, from the superintendent to the business manager, to the purchasing agent. Other personnel classifications find some usage in the medium and larger districts. 100 Taking advantage of discounts - That small districts take no discounts is explained in part by the fact that the two major suppliers don't offer discounts as such. The other districts are about evenly split between those that take only authorized discounts, and those that take them regardless of the time limit. How bids are solicited — Letters to vendors are by far the most common means of soliciting quotations, being used by almost nine out of ten districts. How bids are generally awarded - Total considerations are replaced by low total for each item in larger districts. Price thus becomes the most important factor in volume purchasing. ,Conditions under which purchase orders are issued - They are used by more than half thefdistricts for all purchases, with the greatest per cent of increase in districts between 800 and 1600 men- bership. More than one-third of the systems use purchase orders except for small purchases and emergencies. Paying fog small local purchases - Petty cash is used by about the same proportion, one—third, of all districts. The open account is utilized most by the smallest systems,declining as dis— tricts get larger. The reverse is true with purchase orders, which find their most frequent usage in the big districts. 101 When competitive bidding is use — There is forty per cent greater use of competitive bidding in the largest districts than in the smallest. The rate of increase is not regular, however, for in districts between 2,400 and 14,000 membership, the upward trend is temporarily reversed. Participation in cooperative purchasing may be a factor here. Distribution and form of written bid invitations - In both featurescflfbid invitations, whether they went out to at least three vendors,and whether they included a right-to-reject clause, a positive correlation to district size was found. Legally, a board has the right to reject, whether the statement is included or not. To whom bid invitations are sent - The emergence of the open market is reflected in the greater participation of any interested vendors as districts grow larger. This does not necessarily indicate any less interest in service, so much as it indicates more concern ‘ for obtaining supplies at the best possible price. Presence of vendors when bids are opened - There is a low total incidence of vendors present at bid openings. It is probable that lack of vendor time and interest are more important factors than restrictions made by the purchasers. Bidding time allowed - There appears an inconsistency in the time permitted, which is due in part to the nature of the items and the size of the bid. The period most frequently reported was more than two weeks, by one out of four districts. 102 Reggesting samples with bids — Samples are more frequently requested in larger districts. Almost half the systems reported that they sometimes requested samples, presumably depending on the items involved. Cooperativeppurchasing - The graphic presentations on this subject reflect diverse perceptions. Substantial support comes from the twenty—five per cent of the districts now engaged in it. Those not participating state as the primary reason a preference to do their own purchasing. Prevalence of this reason alone precludes the ex— tension advocated by its exponents. Lower price is the most frequently stated benefit of coopera- tive purchasing. This is subject to qualification, however, when the sorting and distributing to individual schools is done by educational personnel. In last analysis, it appears that the decision to engage or not engage in cooperative purchasing is dependent on study of its ultimate value to the districts contemplating it. Relating Pragtices to Those Recommended by Authorities Whether or not a majority of Michigan districts are following recommended practices is shown in Table 7. ,Almost half of the practices (46.7 per cent) recognized as desirable are being observed by a majority of the districts. 103 Table 7. Summary of Current Purchasing Practices in Terms of Practices Recommended by Authorities L_. a_. VPer cent7of agreement with criterion More than Less than Criterion 50 per cent 50 per cent of districts of districts A ‘General Considerations 1. Written policies are basic to a sound x purchasing program. 2. Item selection can best be made when it x is a cooperative affair, one which in- cludes users. 3. Printed instructions for supply users are x important as a means of obtaining optimum utilization. 4. Charging fees for regular instructional x supplies is not good administrative practice. 5. Greater efficiency is promoted when admin— x istration is given latitude proportional to district size in making'decisions regarding expenditures. 6. It is important that the supply appropriation x balance be known at all times. 7. With proper controls, petty cash saves time x and money in small and emergency purchases. Estpblishing Quality Standards 8. Good business practice calls for speci- x fications that are in writing, that in— clude all items, and must be abided by. 9. Supply specifications vary according to x the complexity of the item. ,A brief des- cription is recommended as minimum posi- tive identification. 10. As many specification sources as are x available should be used. 104 Table 7 -- Continued r’ g ' .A‘rrq} I 4 Per cent of agreement with criterion ‘More than Less than Criterion 50 per cent 50 per cent of districts of districts 11. Specifications, while many sources x 12. are used, can best be written by per— sonnel responsible for purchasing. Standardization of supplies, in the _ x form of supply lists, permits greater purchasing economy. selecting Sources of Supply 13. 14. 15. 16. 18. 19. 20. While there is some merit such as ser- x vice and prompt delivery in showing preferenceifor local vendors, their prices should be competitive with those of non—local vendors. Establishing and maintaining an up—to- x date list of qualified vendors ex- pedites the purchasing program. Maintaining the bidding record of each x vendor provides helpful information on the history and current status of each. The number of vendors varies, depending x on the subject area, volume of purchase and availability of items. It is impor— tant that there be sufficient vendor sources to promote competition. Regardless of?the number of sources used x in purchasing, the aim is to purchase what best serves the district's needs. As districts get larger, it is impera- x tive that delegation of purchasing authority be granted to specialized personnel. Advantages should be taken of discounts x by prompt payment. To do so beyond the ' authOTized period, however,is poor practice. 105 Table 7 -J Continued Per cent of agreement with criterion More than Less than Criterion 50 per cent 50 per cent of districts of districts A Bidding Procedures 21. Bids are to be solicited by whatever x media will encourage competitive prices. 22. Making supply bid awards can best be x done on the basis of total considera- tions, with the lowest quotation for each item the major factor. 23. The use of purchase orders is recommended x whenever practicable. 24. While purchase orders are recommended, it x may be found that the cost and time require— ments for their use with small purchases is proportionately high. In such cases, other means may be more economical and feasible. 25. Competitive bidding is necessary in x volume buying to insure that the lowest prices are obtained. 26A. It is recommended that written bid x invitations go to a minimum of three vendors. ' 263. An important part of the written bid x invitation is a statement‘giving the board the right to reject any and all bids. 27. Any vendor is entitled to submit a quot- x ation if he is considered to be qualified. 28. Bidders are entitled to attend bid x openings. Their presence is to be encouraged. ‘ 106 Table 7 —- Continued Per cent of agreement with criterion More than Less than Criterion 50 per cent 50 per cent of districts of districts ‘- 29. While there are exceptions, the supply x bid period is generally two to three weeks. 30. Requesting that samples be submitted x with quotations is good practice be- cause they help clarify items quoted, and can prevent problems that might develop later. Summary of Intermediate District Practices The majority of intermediate districts do not purchase for their primary districts. Major reasons for this are the scarcity of primary districts and lack of interest. Most intermediate district superintendents perceive themselves as consultants. While a few have exerted leadership in some aspects of purchasing, initiative has generally been leftto the local districts. This is illustrated by those cases where coopera— tive purchasing is in operation without participation by the inter- mediate office. 107 YALIDATING OPINIONS or SUPERIN'IENDENTS pAND VENDORS Individual School District Superinpendents The opinions expressed by various individual superintendents, in interviews with them, generally reinforced what was reported on the questionnaires. Since the information requested was in terms of the ”usual“ practice, rather than an "either-or" alternative, the respondents were free to indicate how they generally handled various procedures in supply purchasing. A number of questions had multiple answers, which also allowed inclusion of variations in practice.7 The most frequent comment made was along the lines of the folaowing, which capsulates the common pattern: We do the bulk of_ Our purchasing during the summer months, on open competitive bidding. Supplies for use during the entire school year are all distributed to the individual schools, before the beginning of school in.September. As small fill-in items are needed throughout the year, purchase orders are issued to local business concerns. The above was expressed by the superintendent of a five- thousand-membership district, but reflects the place of purchasing in the educational organization for most of the medium and small dis- tricts. Within this framework, purchasers were able to respond directly to the questions raised in regard to 223 their purchasing procedures were handled. The incidence of non—response to.indivi- dual questions was very low, confirming that the questions were generally understood. 108 Cooperative purchasing was the area which elicited the most conflicting evaluations. One administrator, fromradistrict having seven thousand students, made this comment: We have investigated the possibility of cooperative purchasing and find that there iatasaving for small school dstricts but not much, if any, for districts of our size and larger. There is a saving if one is willing to accept any qualitythat the cooperative group purchases, which might be as good or better than is now being used, but in many cases the quality is poor. A number of superintendents, while not participating, were eager to express their enthusiasm for the possibilities offered by cooperative purchasing. One said that he has been preaching its merits for years. Intermediate District Superintendents Opinions reflect generally the survey findings, i.e., that some degree of purchasing activity is engaged in by the county office, that others are currently contemplating it,£nd that there is a residue who do not have any present plans to become involved either in aiding individual districts or in cooperative purchasing. Some intermediate superintendents believe that any involve- ment on their part with individual districts would be resented, One of these comments further: I have noticed that superintendents often buy unwisely because they do not consult with the personnel using the materials and supplies, the use of which might vary from school to school, thus making it more unwise at an intermediate level. I think that too little training is obtained by the average superin- tendent for buying critically. However, I can see a greater need for other services at this time from the intermediate level. 109 In contrast to the intermediate superintendent who subscribes to a policy of non—interference, one who is active in cooperative purchasing expressed the opinion that the county office should pro— vide leadership for all the school districts, in any way possible. In his words, his approach is "to encourage over the years, and actively participate in, all forms of cooperative enterprise wherever this satisfies either economic or professional standards.“ Between these two points of view, one with an attitude of beingtwailable if needed, and the other aggressively seeking to promote ideas for greater savings, there are varying shades of opinion. Vendors Interviews were held with the sales managers of the two largest school supply firms in Michigan. The questionnaire's con- tents were discussed with them. Their points of view on various purchasing aspects follow: The vendor’s role - The most important thing that vendors have to sell is service. The school supply salesman, many of whom were formerly educators, serves a real need. His knowledge of school problems enables him to serve as an un- paid member of the superintendent's staff. Since he is in periodic contact with the school administration, he can better provide service for unforeseen changes. He is a pro- fessional person who places the school's concerns above the profit motive. 110 Competitive bidding - As a practice that is growing, the vendors welcome it, but within the fraternity of legitimate school suppliers. It is unfair to ask an.established vendor to provide numerous catalogs, then to use them for doing business with other sources, particularly mail-order houses and other vendors whose only interest is in making the sale. Such outside bidders do‘not support the school program, i.e. they neither advertise in educational journals, nor do they support the conventions. The basic criticism of such sources 'is that they do not provide service. The net price quoted by the recognized supplier offsets the discounts of the low— price-only vendor because of the service feature. (By this reasoning the local vendor is acceptable because by his proximity he is in a position to provide such service.) Local vendor preference is a matter of board policy, and this is well recognized. m Time problems ~ The usual two-week bid period should be doubled, since vendors then would have ample time to contact manufacturers and confirm pricesafid delivery terms. Another time feature which would help balance the vendor's scheduling is a semi-annual order rather than an annual one. ,Cooperativeppurchasing - This is a poor practice, one that is particularly unfair to small vendors. By participating in it, the vendor loses his identity. Price is the major fac- tor, but price without service is self-defeating, and this is why cooperative purchasing will never be a purchasing panacea. The foregoing perspective has merit in that it represents the views of the other party who enters into purchasing contracts. It is a reminder that purchasing is not a one-way affair, but involves the seller as well. CHAPTER V CONCLUSIONS AND RECOMMENDATIONS RECAPITULATION Four areas relating to purchasing were identified: general considerations in determining needs, establishing quality standards, selection of sources of supply, and bidding procedures. Coopera— tive purchasing was included as an additional category, but only to determine the extent of its practice. An intensive review of literature and research was conducted. The legal aspects of pur- chasing were examined for a validating background. Following this, a series of questions was prepared which covered related purchasing practices. Responses to the questions were solicited from all Michigan public school districts having a superintendent. .A brief questionnaire was also used with superintendents of intermediate school districts to determine their purchasing'role as well as their degree of participation in cooperative purchasing. From recommendations of the Association of School Business Officials and other authorities, a set of criteria was prepared. The actual practices were then compared with those recommended. A summary of the status of current practices, as well as valida- ting opinions, were presented in Chapter IV. 111 112 CONCLUSIONS It will be noted, in studying the graphs, that the degree to which districts observe some practices relates to district size. While size is not a cause, it is a condition which characterizes some practices more than others. Further, it may be concluded that certain practices find optimum usage in districts of a particular membership range. Who does the purchasing, the incidence of competitive bidding, and the degree of standardization all illustrate this pofint. Other practices derive their degree of utilization not by size differentials but by local board and administrative policies. They appear to be entirely dependent on the local policy, regardless of district size.. Examples are found in such practices as charg- ing fees, the suggestions of users as a source of specifications preparation, and in the use of a petty cash fund. The implication of this distinction between those practices identified with district size, and those determined by local policy is that in the latter category, practices are changeable. It then follows that if local review indicates the desirability of modifying its practices, the district size is no barrier. This assumes greater importance when comparisons are made with recognized criteria. It is not only helpful to know what practices ‘pppld be changed by local policy, it is of further aid to know, by checking with recommended standards, what should be changed. 113 The foregoing statements provide background for the first two conclusions which follow. Other conclusions are based on findings from individual practices, and supplement the graphic interpretation. Still other conclusions might be drawn which apply to particular segments of school size. 1. Individual practices may be identified with district size, with local policy and administrative organization, or both. 2. ,Almost half of the purchasing practices studied are being used as recommended by a majority of Michigan school districts hav— ing superintendents. 3. The following approved practices are being utilized in varying degrees by Michigan school districts. The extent of their usage is identified with district size and qualified by local busi- ness administration policy: a. written purchasing policies. b. Printed instructions for use of supplies. c. Liberalized authorization for administration to purchase. d. Application of method whereby the supply appropriation balance will be known at all times. e. Use of the petty cash fund, or other convenient means, to make small and emergency purchases. f. Use of written specifications. g. The basis of preference for local vendors. h. Competitive bidding. i. Having a minimum of three vendors for bid invitations. j. A quotation period commensurate with the size of the bid. 114 4. In the absence of legal clarification, and in the interests of organization and economy, local boards have assumed the initiative in such matters as delegating authority and charging for pupil materials. Some legal requirements are not being met, and such violations exist only because they have not been challenged and tested in the courts. 5. Substantial losses are resulting from failure by the majority of districts to take prompt advantage of discounts offered. 6. Cooperative purchasing remains a controversial subject, practiced by a few, discussed by some, ignored by the majority, Little is being done to confirm or disprove its merits, or to ex- plore its possible applications. RECOMMENDATIONS The findings of the study and the conclusions drawn from them provide a basis for the following recommendations. 1. Personnel charged with purchasing responsibility need more background and guidance. This can be provided by the use of regular meetings with others in like capacity to exchange ideas and information; communication with the intermediate and state levels; professional courses toward certification; and pre-service and in- service education. 115 2. More initiative should be taken at the intermediate level to exert purchasing leadership, as is being done in a few notable exceptions. .Aid to individual districts, particUlarly smaller ones, could include preparation of models for standard supply lists, specifi- cations, standard bid fdrms, information on supply unit costs, and workshops for in-service training of school administrators. Rather than usurping local authority, such help reinforces it. 3. Likewise, contributionsfrom the state level are needed: a. Collaboration and guidance on the projects suggested for the intermediate office can be extended. b. Much purchasing research can be provided. c. One of the most important aids at this level would be the preparation of a purchasing handbook to be used as a guide for all districts. Because it is contrary to local autonomy, and because of the wide range in local conditions, it is not recommended that statewide, centralized purchasing be considered. 4. Of particular concern to state authority is the clarifi— cation of current statutes. Additional study is necessary to clarify and provide mere specific legal guidelines for local boards and administrators. 5. The intermediate district and the Department of Public Instruction can help, but responsibility for change rests primarily with the local district. The data clearly indicate those practices that require corrective action. The following recommendations for improvement in purchasing practices are accordingly directed to the individual school districts. In order to establish and maintain an 116 adequate prOgram.for purchasing instructional supplies, each dis- trict should: a. Have in writing its purchasing policies, instruc— tions for use of supplies, and specifications. Local purchasing criteria should be specific, and subject to periodic review. b. Provide liberal monetary authorization for adminis- tration to purchase. c. Apply modern accounting methods so that the appropriation balances will be known at all times, provisions can be made to expeditiously purchase small quantities and emergency items, and prompt advantage can be taken of discounts offered. d. Establish a cdde for vendor relations that recog— nizes the mutual obligations of both parties. Con- tractual and general conditions of competitive ‘bidding, the basis of any preference given to local vendors, and variations in the quotation period should be included in its contents. 6. Much more study is needed in cooperative purchasing. On the basis of the findings, it appears that the intermddiate office is in an excellent position to provide leadership in this area. The feasibility of establishing even a limited program should be ex- plored, and local administration should be stimulated and encouraged to consider its merits. A number of recommendations are currently in effect in many districts. but more utilization and extension is needed. In final analysis, the degree of up—dating is dependent on the attitudes of those managing the schools, the importance they attach tO-purchasing, and the time they spend in the purchasing program. 117 ,SUGGESTIONS FOR FURTHER STUDY 1. This study has been confined to the areas which deal with purchasing mechanics and external features. Research is needed on the other, or internal, aspects. The Association of School Business Officials lists these as: methods of ordering; schedules for ordering, tabulating, purchasing, and delivering; delivery of supplies by vendors; and distribution of supplies to schools. 2. Similarly, only those practices related to instructional supplies have been surveyed. Parallel statewide studies in such areas as equipment and contracted services could further clarify and provide direction for improving purchasing practices. 3. There is need for further research of the elements of ‘ good purchasing practice that could lead to the development and preparation of a statewide purchasing handbook. Similarly, the entire area of purchasing practices should be studied in terms of what can be done to meet the recommended standards. 4. The economic status of districts is inherent in this study, but further enlightenment can be derived by relating practices to state equalized valuation. Such an analysis could provide a basis for rating purchasing practices of individual as well as inter- mediate districts. 118 5. TWO—thirds of Michigan's school districts are primary. Individually, their purchasing power may be small, but collectively this is not so. Because of this, there is a need to obtain more information on primary diltrict purchasing, beyond what was gathered in this study from the intermediate districts. B IBL IOGRAPHY BIBLIOGRAPHY BOOKS AND HANDBOOKS Association of School Business Officials of the United States and Canada, Purchasing and SupplyiManagement Manual for School Business Officials, Bulletin No. 22, Evanston, Illinois: The Association, 1962. Hamilton, Robert R., and Mort, Paul R. The Law and Public Education. Brooklyn: The Foundation Press, Inc., 1959. Hamilton, Robert, and Reutter, Edmund., Legal Aspects of School Board Operation. New York: Bureau of Publications, Teachers College, Columbia University, 1958. Linn, Henry H. Practical School Economies. New York: Bureau of Publications, Teachers College, Columbia University, 1934. Morphet, E. L., Johns, Roe, Reller, Theodore. Educational Adminis— tration: Concepts, Practices, and Issues. New York: Prentice-Hall, Inc., 1959. Mort, Paul, Reusser, Welter, and Polley, John. Public School Finance. New York: McGraw-Hill Book Company, 1960. Reason, Paul, and White, Alpheus. Financial Accounting for Local . and State School Systems. Washington: United States Govern- ment Printing Office, 1957. Reeder, Ward. The Fundamentals of Public Sghool Administration. New York: The Macmillan Company, 1958. M,Ritterskamp, James, Abbott, Forrest, and.Ahrens, Bert. Purchasing for Educational Institutions. New York: Bureau of Publications Teachers College, Columbia University, 1961. Roe, WilliaulH. School Business Management. New York: McGraw-Hill Book Company, 1961. 120 121 ,ARTICLESJ PERIODICALS, AND PROCEEDINGS Brainard, A. D. "Fifty Do's and Don'ts About School Purchasing," Michigan School Board Journal, (December, 1957), 2-14. Burch, Raymond R. ”Purchasing," The Nation's Schools, LXVII (June, 1961), 80. Burns, H. Spilman. "How to Buy with Both Economy and Quality in ‘Mind," The Nation's Schools, LXVIII (October, 1961), 64-69. Burns, H. Spilman. "Quality is Measurable," Proceedings of the Thirty-ninth Convention, The Association of School Business Officials of the United States and Canada. Evanston, Illinois: The Association, 1953, p. 246. Crawford, C. C. "Ethical and Practical Implications of Bidding Policies," The Nation's Schools, LI (February, 1953), 100, 102. Edwards, Newton. "Contractual Authority of School Board," pp. 31-32, Law and the School Business Manager, Lee Garber, editor. Dans— ville, Illinois: Interstate Printers and Publishers, Inc., 1957. Elliott, Ralph. "How to Establish Usable Purchasing Standards," The Nation’s Schools, LIX (March, 1957), 94. Fair, Ernest W} “Discounts are a Secret of School Budget Savings," The Nation’s Schools, XLVI (October, 1950), 78. Fegley, Paul V. “Adding Suppliers and Dealing with Current Suppliers," Proceedings of the Forty:seventh Convention, The Association of School Business Officials of the United States and Canada, Evanston, Illinois: The Association, 1961, 132. Garber, Lee 0. "Legal Problems Involved in Purchasing," Proceedings of the Fortyflfifth Convention, The Association 6ijchool 'Business Officials of the United States and Canada. Evanston, Illinois: The Association, 1959, 153. Gray, Albert. “How Vague Can Your Order Be?" Purchasing, LIII (July, 1962), 53—55, 85. ' Joyner, Schuyler. General address given at annual meeting of Associa- tion of School Business Officials of the United States and Canada, October 18, 1962, Proceedings ofythe Convention. Evanston, Illinois: The AssdEEEtion, 1962, 355-367. 122 Larke, George. “Test the Quality of Purchases and Save," American School Board Journal, CXXXIX (December, 1959), 24—25, Levin, Sol. "How Small School Systems Rwy Adapt in Purchasing Some of the Better Practices of the Larger School Systems to Fit Their Needs,” Proceedings of the Forty—fifth Convention, The Association of-School Business Officials of the United States and Canada. Evanston, Illinois: The Association, 1959,331—332. Little, Thomas C. The Administration of School Supply Purchases in Kentucky. Nashville: George Peabody College, Contributions to Education, No. 408, 1949. McLure, William P. Educational Cost Analysis. Urbana, Illinois: Bureau of Educational Research, University of Illinois, 1957. McCurrach, David. "Cooperative Purchasing! Is It Werth It?" School Business Affairs, XXVIII (April, 1962), 16-17, 22. Melton, Monroe. "Practices in.Awarding Tie Bids on SUpplies and Equipment," School Busipess Affairs, (June, 1963)§ 16. Michigan School Board Journal. "Cooperative Purchasing in Oakland County,“ Michigan School Board Journal, VII (April, 1961), 17-18. O'Hearn, Aldan. “How Much Local Purchasing Is Enough?“‘ The Nation's Schools, LXXII (August, 1963), 43. O'Hearn, Aldan. “Purchasing," The Nation's Schools, LXVII (January, 1961), 66. Costing, B. R. "Legal Limitations on Buying," The Nation‘s Schools, VI (July, 1957), 61‘62. Peters, J. S., and Briscoe, C. A. "Standard Supply Lists," The Nation's Schoolpb LV (March, 1955), 104. Redmond, J. F., and Pearson, A. G. “Purchasing School Supplies in a Big City System,".Americaanchool and University, XXV (1953), 373, 376. Reavis, William C. "Hazards of Local Politics in School Business Administration,“ Education Digest, XIX (March, 1964), 12-13. Roach, Stephen F. "General Authority of School Boards," Law and the School Business.Manager, op. cit. School Management. "How to Improve Your School Business Procedures," School Management, (September, 1959), 43-46, 92—94. 123 Shinneman, Dean. “How to Streamline Purchasing," The Nation’s Schools, LXVIII (July, 1961), 57-58. Singer, H. Halleck, "Authority of Boards of Education to Delegate Their Discretion in Matters of Purchasing," p. 223. 1963 Year- . *— book of School Law, by Lee Garber, Dansville, IllhnOLS: Inter- state Printers and Publishers, Inc., 1963. State of Michigan. General School Laws, Revision of 1959, Lansing, ‘Michigan: State of Michigan, 1960. UNPUBLISHED MATERIALS Bluhm, George Phillip, Sr. "Suggestions for the Improvement of the Practihes of Purchasing, Storing, and Distribution of Teaching Supplies Based on a Study of Some Small and Medium Sized Schools in Pennsylvania.“ Unpublished Ph.D. dissertation, Pennsylvania State University, 1954. Bunten, Charles A. "Selecting, Purchasing,Issuing, Financing, and Accounting for Industrial Arts Supplies in the Secondary Schools of Missouri.“ Unpublished Ed.D. dissertation, University of Missouri, 1955. Graham, William David. "Comparison of Actual and Preferred Practices of Purchasing in Selected Local Districts in Certain Ohio Counties." Unpublished Ed.D. dissertation, Pennsylvania State University, 1961. Hardwick, Clyde T. "Cooperative Purchasing Techniques for Municipal- ities." Unpublished Ed.D. dissertation, University of Michigan, 1956. Leaden, John Warren. "A Study of School District Purchasing Practices in the State of Washington with Special Reference to Cooperative Purchasing Through the King County School Directors' Association." Unpublished Ph.D. dissertation, University of washington, 1952. APPENDIX A 125 Dear Superintendent Attached is a questionnaire which is to be used to gather data relative to current practices in purchasing instructional supplies. In procurement of instructional supplies there are so many diverse factors that it is neither possible nor desirable to establish a single pattern. Administrative practices which are satisfactory in one district may be unsatisfactory in another. While recognizing such differences, the attached questionnaire seeks to survey and identify current practices. Many school districts have initiated practices and procedures which have proven to be very effective. In sharing them with other districts there is considerable mutual benefit. Because the findings will be published, your response is needed so that recommended practices and procedures can be based upon a complete survey of current practice. School administrators are becoming increasingly conscious of the savings which can be gained by developing good purchasing procedures and many times by purchasing cooperatively with other school districts. Because of this increased awareness, many requests for information and assistance are being directed to the Department of Public Instruction. It is hoped that your response to this request for data will provide guidelines to current practices which can be published for the use of all school districts. Any suggestions or comments you wish to make in addition to the items in the questionnaire will be appreciated. Thank you very much for your assistance and cooperation in this project. Sincerely, flew Alexander J. Kloster Deputy Superintendent, Administration Michigan Department of Public Instruction AJK/ae AEPENDIX B 127 QUESTIONNAIRE OII PURCHASE OF IIISTIIUOTIUIIAL SUPPLIES INSTRUCTIONS: It is recognized that with lack of personnel and time, it is difficult to utilize adequate purchas- ing practices. helpful guide lines may be developed. A major purpose of this survey is to determine the status of present procedures, in order that This questionnaire refers to INSTRUCTIONAL SUPPLIES ONLY, i.e. those consummable, relatively inexpensive items, such as chalk, paper, crayons, bats and balls, etc. Some questions HAVE SEVERAL ANSWERS, depending on your situation, so PLEASE CHECK ALL THAT APPLY. Responses should reflect current practices in your school sysrem, and not your opinion as to what constitutes a good practice. Feel free to make additional comments on the back of this sheet. I. 6. l0. Are your purchasing policies in writing? completely enough to provide a guide __ no Who determines what instructional supplies are needed? individual users administration committee _ other Do you issue printed instructions regarding use of supplies? _ yes, covering all subjects __ yes, covering some subjects __ no Does your district charge a fee for workbooks laboratory materials classroom supplies (crayons, paper, etc.) ls adminisuation authorized to make purchases within prescribed limits? __ yes, within S ... yes, within established budget no When is the appropriation balance for the pur- chase of supplies known? at all times _ monthly at regular intervals .... at the start and end of the fiscal year May some purchases of supplies be made from a petty cash fund? yes, for small quantities yes, for emergencies no How extensive are your specifications? _ they are in writing _ they include all items _ they must be abided by How complete are your specifications? _ user orders what he wants _ single brand name or catalog number _ brief description. plus one or more brand names _ full description. with or without brand names What sources are used in preparing specifica- 'V suggesrions of users catalogs recommendations of salesmen samples submitted other a. D m II. 12. I4. IS. I6. l7. IS. (OVER) Who writes the specifications? committee of users administration individuals requesting the items _ written specifications are not used Are supplies usually standardized so that a single selection is made for the entire district? __ yes no sometimes Do local supply vendors usually receive any preference? _ yes, based on_price,_qual.ty,_service no Is a list of qualified supply vendors maintained by your district? _ yes _ no Is a bidding record kept of each vendor? _ yes no Approximately how many vendors do vou have for instructional supplies? 5 or less 6 to IO II to 15 16 to 20 _ more than 20 Which vendors have generally furnished most of your classroom supplies in recent yturs? Name of Firm Where located How do you buy most of your instructional supplies? salesmen catalogs competitive bidding local vendors other l‘). 20. 21. Is.) Id 26. What is the title of the person directly responsi- ble for purchasing in your district? board member superintendent business manager purchasing agent principal teacher other When paying invoices, do you take advantage of discounts for prompt payment? always, even when late _ only when paid within time specified no flow are bids solicited? __ letter to vendors __ telephoning local vendors __ posting public notice __ notice in local newspaper _ other How are supply bids generally awarded assuming they meet specifications? lowest total for each item lowest total for entire bid both of the above total considerations, based on price, quali- ty, and service Under what conditions are purchase orders is~ sued? for all purchases in all cases except small purchases, or emergenCies never What is the usual way of paying for small local purchases? petty cash personal funds, reimbursed later purchase order open account other When do you use competitive bidding? in all cases in all cases over 3 in all cases except emergencies for specialized items not at all (Omit questions 26-30 if you do rLo_t use written bid forms.) Do written bid invitations always go out to at least three vendors include a statement giving the board the right to reject any and all bids To whom are bid invitations sent? to specialized vendors, according to the type of commodity to general vendors _ to any interested vendor Are bidders usually present when bids are opened? _ yes __ no sometimes 128 30. 31. How much bidding time is usually allowed? I week or less between I and 2 weeks more than 2 weeks _ varies depending on size of bid Are samples requesred with bids? yes no __ sometimes What was your 1963-64 (fourth Friday) member- ship as reported to the Department of Public Instruction? The [allowing questions are concerned with coopera- tive purchasing. which is an agreement between tu'o Or more school districts to combine their purchases 0/ any items. 32. 33- If you are not now engaged in cooperative pur- chasing, what is the reason? _ prefer purchasing for only my district lack of time insufficient savings _ don‘t believe in it Do you now purchase any instructional supplies cooperatively? __ yes, years of participation no I/ "yes". please answer the balance 0/ the questions. 34. 35. 36. 37. What do you estimate is the approximate percent of savings? none less than 10% IO — 20% over 20% have been the advantages of cooperative purchasing? lower prices improved standards savings in time more understanding between districts more vendor service none have been the problems in cooperative pur- chasing? insufficient savings general lack of interest disagreement on item selction organizational problems. and/or lack of time loss of individual district preferences other are the supplies distributed? vendor delivers to one point in each district vendor delivers to each school vendor delivers to one location, where each district sorts and distributes its share other Thank you for your response. Please return the com- pleted form in the envelope provided, to PURCHASING SURVEY P. O. Box I64 East Lansing, Mich. 48824 ABPENDIX C 130 To the Intermediate School District Superintendent: A questionnaire on purchasing practices is being distributed at this time to all Michigan school diStriCts except primary. A copy of the explanatory letter which accompanies the questionnaire is enclosed. In order to obtain information on purchasing for primary districts, as well as any cooperative purchasing activity by your office, the form below is being sent to you for completion. Your cooperation in this matter is appreciated. The information obtained will help to provide a background for improving purchasing practices in Michigan schools. PURONASING QUESTIONNAIRE FOR INTERMEDIATE SONOOL OISTRIOTS INSTRUCTIONS: It is recognized that with lack of personnel and time, it is difficult to utilize adequate purchas- ing practices. A major purpose of this survey is to determine the status of present procedures, in order that helpful guide lines may be developed. This questionnaire refers to INSTRUCTIONAL SUPPLIES ONLY, such as chalk, paper, crayons, bats and balls, etc. Some questions have SEVERAL ANSWERS, depending on your situation, so PLEASE CHECK ALL THAT APPLY. Feel free to make additional comments on the back of the sheet. 1. How much purchasing for primary districts is done 5. Are there cooperative purchasing arrangements in the intermediate office? within your district that are not related in any none way to your office? _ prepares supply Ems yes _ consolidates requests no __ obtains prices __ issues purchase orders 6. What do you believe should be the functions of __ other($pecify) the intermediate office as far as cooperative purchasing is concerned? 2. If the answer to question 1 was "none", what do encourage all districts to do their own pur- you believe is the major reason? chasing distance between districts __ help all districts on a consultant basis 7 — lack of uniformity in dIStfiCt size ...... help the smallest districts by consolidating __ lack of interest requests _. other (specify) _..... do the purchasing for all districts served by the intermediate office 3. Is the intermediate office participating in coop- _ other (specify) erative purchasing of any instructional supplies with districts larger than primary? __ yes with—districts number of years _. no Thank you for your response. Please return the com- pleted form in the enclosed envelope to 4. Has the intermediate office ever attempted to or- ganize local districts for cooperative purchasing? PURCHASING SURVEY yes P. O. Box 164 no East Lansing, Mich. 48824