UGA Class Purchasing Flashcards

Purchasing Fundamentals

• "80/20" Rule: A business principle indicating that a small fraction of inputs (20%) often accounts for most outputs (80%).
• Addendum: A written amendment to contracts or proposals that includes changes or corrections.
• Auctioning: Disclosing competitor prices to allow suppliers to lower their bids.
• Bid Bond: A guarantee that a bidder will not withdraw their proposal, typically requiring 5% of the bid amount.
• Bidder's List: A compilation of suppliers eligible to submit bids for specific products or services.
• Capital Asset: Long-term tangible assets such as real estate and equipment, not easily liquidated.
• Capital Budget: The annual financial plan for capital improvements approved by governing bodies.
• Capital Project: Initiates the acquisition or construction of capital assets, such as land or buildings.

Purchasing Systems

• Centralized Purchasing System: All purchasing decisions are made by a single unit for the whole organization, promoting efficiency.
• Decentralized Purchasing System: Individual departments conduct their own purchases based on specific needs.
• Combination Purchasing System: Centralized handling of large purchases while allowing departments to manage smaller purchases independently.

Compliance and Regulations

• Collusion: Illegal agreement between parties to restrict competition, undermining fairness in procurement.
• Davis-Bacon Act of 1931: A federal law mandating prevailing wage payments on public works projects to ensure fair labor practices.
• Informal Bid: A simplified purchase procedure for small dollar amounts that bypasses formal advertising requirements.

Procurement Processes

• Competitive Sealed Bidding: A formal method of soliciting bids where price is the primary determining factor.
• Competitive Sealed Proposal: Proposals submitted in sealed envelopes to be reviewed publicly at a predetermined time.
• Emergency Purchase: Procurements made in urgent situations to prevent significant loss or harm.

Financial Instruments

• Payment Bond: Guarantees payment to subcontractors for labor and materials, often secured by various financial instruments.
• Performance Bond: Protects public entities from losses if a contractor fails to complete their obligations as specified.

Purchasing Goals

• Goals include efficiency (minimizing time and resources), effectiveness (quality of obtained goods/services), and economy (cost savings).
• A sound purchasing system prevents waste, ensures fair competition, and maximizes savings for taxpayers.

Key Processes and Practices

• Specifications: Detailed requirements for products or services, crucial in the procurement process for consistency and compliance.
• Pre-Qualification: Screening of contractors to develop a qualified supplier list based on financial and reputational criteria.
• Requisition: A formal request from a department to the purchasing office detailing required items, quantities, and timelines.

Roles within Purchasing

• Staff Function: Research and advisory roles aiming to inform user departments and optimize purchasing decisions.
• Service Function: Direct purchasing roles that supply the needs of departments for efficient operation.
• Line Function: Focuses on achieving savings for government through strategic purchasing decisions.

Market Engagement and Strategy

• Reverse Auction: A competitive bidding process where sellers lower prices in response to buyer needs.
• Commodity Management: Responsible procurement for specific goods and services to streamline purchasing.

Additional Definitions

• Encumbrance: Future financial obligations made through purchase orders without immediate spending.
• Specifications: Explicit criteria essential for performing jobs or services effectively.
• Standardization: The unification of products across departments or organizations to enhance efficiency.

Local Government Purchasing

• Policies and regulations establish purchasing authority for local jurisdictions, ensuring structured governance.
• Common exemptions include utilities, legal fees, and training costs, recognized as necessary purchases outside standard processes.

Overall Importance

• Effective purchasing is vital for optimizing government spending, ensuring fair practices, and achieving the best value for taxpayers through a comprehensive and well-structured system.