Questions and Answers
What is the '80/20' Rule referring to?
What is an addendum?
A written change, addition, alteration, correction, or revision to a bid, proposal, or contract document.
What does auctioning entail?
Telling a supplier the price(s) of another supplier to allow the former supplier to submit the lowest price.
What is a bid bond?
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What is a bidder's list?
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Define a capital asset.
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What constitutes a capital budget?
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What is a capital project?
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What is a centralized purchasing system?
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Define collusion in a purchasing context.
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What are combination performance and design specifications?
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What is a cooperative purchasing arrangement?
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What is the Davis-Bacon Act?
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What does decentralized purchasing mean?
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Define design specifications.
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What is direct pay?
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What is economy in purchasing?
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What does effectiveness mean in purchasing?
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Define efficiency in purchasing.
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What constitutes an emergency purchase?
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What is an encumbrance in purchasing?
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Define e-procurement.
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What does expedite mean in a purchasing context?
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What does FIFO stand for?
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What does FOB Delivered mean?
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Define FOB Source.
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What is a formal procurement?
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What is governmental purchasing?
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What is an informal bid?
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What does LIFO mean?
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What is a line function in purchasing?
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Define materials management.
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What is an operating budget?
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What is a payment bond?
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What does a performance bond do?
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What are performance specifications?
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What are public works?
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What is pre-encumbrance?
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What does pre-qualification involve?
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What is procurement?
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What is a purchase order?
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Define purchasing authority.
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What is the purchasing cycle?
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What is a requisition?
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What does it mean to be responsible in purchasing?
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What does it mean to be responsive in purchasing?
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What is a reverse auction?
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What is the service function in purchasing?
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What is sole source purchasing?
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Define specifications in purchasing.
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What does split purchase refer to?
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What is a staff function in purchasing?
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What does standardization mean in purchasing?
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Define supply chain management.
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What does supplier management involve?
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What is tabulation in purchasing?
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What are terms and conditions in a contract?
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Define ordinance in the context of purchasing.
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What is the combination purchasing system?
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What does the '10%, 90%' refer to in purchasing?
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When does a bid need to be advertised?
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What establishes purchasing authority?
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What is the difference between policies and procedures?
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What are the determining factors for centralizing or decentralizing purchasing?
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What are the advantages of a centralized purchasing system?
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What is an advantage of a decentralized purchasing system?
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What does a combined centralized/decentralized purchasing system allow?
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What must purchasing have to be effective?
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What establishes purchasing authority?
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What support is essential for implementing a centralized purchasing system?
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What are the steps in the purchasing process called?
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Study Notes
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.
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Description
Test your knowledge on key terms and principles from the UGA Purchasing class with these flashcards. Learn important concepts like the '80/20' rule and the definition of an addendum in the context of contracts and proposals.