UGA Class Purchasing Flashcards
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Questions and Answers

What is the '80/20' Rule referring to?

  • A method for managing inventory
  • A principle stating a small number yields most of the output (correct)
  • A guideline for pricing strategies
  • None of the above

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?

<p>An insurance agreement that guarantees the bidder will not withdraw the bid.</p> Signup and view all the answers

What is a bidder's list?

<p>A list of companies maintained by the purchasing office of suppliers and contractors who wish to bid.</p> Signup and view all the answers

Define a capital asset.

<p>All tangible property which cannot easily be converted into cash and is usually held for a long period.</p> Signup and view all the answers

What constitutes a capital budget?

<p>The first year of the Capital Improvements Plan as approved by the Commission.</p> Signup and view all the answers

What is a capital project?

<p>A project that results in the purchase or construction of capital assets.</p> Signup and view all the answers

What is a centralized purchasing system?

<p>A system where purchasing functions reside in a singular business unit that buys on behalf of the entire organization.</p> Signup and view all the answers

Define collusion in a purchasing context.

<p>An agreement between two or more persons to limit open competition by deceiving or defrauding the government.</p> Signup and view all the answers

What are combination performance and design specifications?

<p>The most common type of specification, including important characteristics for the end result.</p> Signup and view all the answers

What is a cooperative purchasing arrangement?

<p>Two or more entities purchasing jointly to achieve lower unit prices and reduced costs.</p> Signup and view all the answers

What is the Davis-Bacon Act?

<p>A United States federal law that requires paying prevailing wages on public works projects.</p> Signup and view all the answers

What does decentralized purchasing mean?

<p>Each user department buys for itself based on its own needs.</p> Signup and view all the answers

Define design specifications.

<p>Specifications that describe the characteristics and features of the product or equipment.</p> Signup and view all the answers

What is direct pay?

<p>A payment that isn't processed through Purchasing and involves a direct voucher to Accounts Payable.</p> Signup and view all the answers

What is economy in purchasing?

<p>A goal of purchasing measured in terms of cost savings.</p> Signup and view all the answers

What does effectiveness mean in purchasing?

<p>A goal measured in terms of obtaining the good or service at the required quality level.</p> Signup and view all the answers

Define efficiency in purchasing.

<p>A goal measured by how well the purchase is obtained in terms of time and staff energy spent.</p> Signup and view all the answers

What constitutes an emergency purchase?

<p>A sudden occurrence that poses imminent danger requiring immediate action.</p> Signup and view all the answers

What is an encumbrance in purchasing?

<p>An amount for which there is a legal obligation to spend in the future, created by a purchase order.</p> Signup and view all the answers

Define e-procurement.

<p>A system that handles some or all of the procurement cycle electronically.</p> Signup and view all the answers

What does expedite mean in a purchasing context?

<p>To execute promptly.</p> Signup and view all the answers

What does FIFO stand for?

<p>First in first out.</p> Signup and view all the answers

What does FOB Delivered mean?

<p>Buyer takes ownership of the goods from the seller at the buyer's delivery location.</p> Signup and view all the answers

Define FOB Source.

<p>Buyer takes ownership of the goods at the seller's shipping point.</p> Signup and view all the answers

What is a formal procurement?

<p>A procurement exceeding a dollar threshold requiring legal parameters.</p> Signup and view all the answers

What is governmental purchasing?

<p>A system of policies and procedures for acquiring goods and services for the government.</p> Signup and view all the answers

What is an informal bid?

<p>A small dollar procurement method not requiring legal advertising.</p> Signup and view all the answers

What does LIFO mean?

<p>Last in first out.</p> Signup and view all the answers

What is a line function in purchasing?

<p>A role that strives to achieve savings for the government.</p> Signup and view all the answers

Define materials management.

<p>The movement of materials through an organization including inventory and buying.</p> Signup and view all the answers

What is an operating budget?

<p>A detailed projection of estimated income and expenses over a given period.</p> Signup and view all the answers

What is a payment bond?

<p>A contractual instrument guaranteeing subcontractors will be paid.</p> Signup and view all the answers

What does a performance bond do?

<p>Protects the public entity from loss due to the bidder's inability to complete the contract.</p> Signup and view all the answers

What are performance specifications?

<p>Specifications that focus on what the product or equipment should accomplish.</p> Signup and view all the answers

What are public works?

<p>Projects financed by the government for community use.</p> Signup and view all the answers

What is pre-encumbrance?

<p>An expected spend amount without a legal obligation, created by a requisition.</p> Signup and view all the answers

What does pre-qualification involve?

<p>The screening of potential vendors based on various factors.</p> Signup and view all the answers

What is procurement?

<p>The acquisition process of goods and services.</p> Signup and view all the answers

What is a purchase order?

<p>A document issued by a buyer to a seller indicating ordered products or services.</p> Signup and view all the answers

Define purchasing authority.

<p>The authority delegated to a purchasing system, usually through a local ordinance.</p> Signup and view all the answers

What is the purchasing cycle?

<p>The steps that an organization goes through when making a purchase.</p> Signup and view all the answers

What is a requisition?

<p>A document generated to notify the purchasing office of required items and quantities.</p> Signup and view all the answers

What does it mean to be responsible in purchasing?

<p>Meeting the overall capability to satisfactorily perform.</p> Signup and view all the answers

What does it mean to be responsive in purchasing?

<p>Meeting all terms, conditions, and specifications.</p> Signup and view all the answers

What is a reverse auction?

<p>A process where buyers communicate their needs, and sellers competitively reduce their prices.</p> Signup and view all the answers

What is the service function in purchasing?

<p>A role that performs buying for the organization.</p> Signup and view all the answers

What is sole source purchasing?

<p>When there is only one vendor capable of providing a needed product or service.</p> Signup and view all the answers

Define specifications in purchasing.

<p>An explicit set of requirements to be satisfied by a product or service.</p> Signup and view all the answers

What does split purchase refer to?

<p>A division of a purchase into multiple transactions to avoid formal procurement processes.</p> Signup and view all the answers

What is a staff function in purchasing?

<p>Researching market trends and advising user departments on new products.</p> Signup and view all the answers

What does standardization mean in purchasing?

<p>Adoption of a single product or group of products by organizations.</p> Signup and view all the answers

Define supply chain management.

<p>Management of a network of businesses involved in providing products and services.</p> Signup and view all the answers

What does supplier management involve?

<p>Conducting or supervising an organization's suppliers of goods and services.</p> Signup and view all the answers

What is tabulation in purchasing?

<p>The recording of responses to bids for comparison and analysis.</p> Signup and view all the answers

What are terms and conditions in a contract?

<p>Provisions, requirements, and specifications forming an integral part of an agreement.</p> Signup and view all the answers

Define ordinance in the context of purchasing.

<p>A method through which purchasing authority and responsibility is established.</p> Signup and view all the answers

What is the combination purchasing system?

<p>A system where large dollar purchases are handled centrally and smaller ones by user departments.</p> Signup and view all the answers

What does the '10%, 90%' refer to in purchasing?

<p>It refers to the distribution of time spent on higher and lower dollar purchases.</p> Signup and view all the answers

When does a bid need to be advertised?

<p>When it is valued at $100,000 or more.</p> Signup and view all the answers

What establishes purchasing authority?

<p>Ordinance or regulations, which become policy.</p> Signup and view all the answers

What is the difference between policies and procedures?

<p>Policies are broader, while procedures should be specific and detailed.</p> Signup and view all the answers

What are the determining factors for centralizing or decentralizing purchasing?

<p>The government's size and budget.</p> Signup and view all the answers

What are the advantages of a centralized purchasing system?

<p>Greater savings through volume buying, reduced costs, and standardized purchases.</p> Signup and view all the answers

What is an advantage of a decentralized purchasing system?

<p>The user department knows exactly what is needed.</p> Signup and view all the answers

What does a combined centralized/decentralized purchasing system allow?

<p>Larger dollar purchases are handled centrally while smaller purchases are done quickly by user departments.</p> Signup and view all the answers

What must purchasing have to be effective?

<p>Both authority and responsibility.</p> Signup and view all the answers

What establishes purchasing authority?

<p>Policy, procedures, rules, and regulations.</p> Signup and view all the answers

What support is essential for implementing a centralized purchasing system?

<p>Support from elected/appointed officials and consensus from user departments.</p> Signup and view all the answers

What are the steps in the purchasing process called?

<p>Purchasing cycle.</p> Signup and view all the answers

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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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.

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