We have all heard a lot in the news recently about the stimulus packages, bailouts, government spending, etc. Not too long ago the $787 billion American Recovery Act, aka stimulus law, went into effect. That number seems so ridiculous and surreal it’s difficult to wrap your head around it. Where does that money go in terms of Philadelphia and the surrounding areas? After everything was said and done, $16 billion of that is expected to flow into Pennsylvania and $17.5 billion into New Jersey. I started to think about how the city and state governments are spending this money. On an everyday basis, where are our tax dollars going? I have friends that are “civil servants” for the city, state, and federal governments so I decided to do a blog series on government spending, looking at some of these questions:
· What does the government spend all this money on?
· What products and services are they sourcing and how?
· What is the government doing to try and save our tax dollars?

I decided to start with an overview of local government spending and move up from there. The following is an overview of some of the things I discussed with a high city official that has worked for Philadelphia for over 37 years.

The City of Philadelphia provides public services to the 1.5 million residents of the city. There well over 30,000 employees (police, fire, doctors, lawyers, engineers, accountants, etc.) that work full time to provide these services. These employees determine and request the supplies and services (both professional and general services) to fulfill their daily job responsibilities.

The local government has sub-divided into around 80 departments (police, fire, water, streets, etc.) to perform the required public services. Each department is assigned specific duties and responsibilities. Some supplies are specific to certain departments, like road salt for the Streets Dept. or chlorine for the Water Dept. while many supplies are generic (office supplies). At some point, the city realized it was economically sound to establish the Procurement Department to take advantage of the discounts that would be available from ordering in large quantities.

The Procurement Department has established rigid procedures to establish an ethical and fair arena so that no vendors would have an unfair advantage over any other. All supplies and service requests are advertised in newspapers and professional trade journals to encourage competition. The award of a bid is always given to the lowest responsible bidder of the requested supplies or services.

The Procurement Department always accepts the lowest responsible bidder except in the case of professional services, i.e. engineering services. When engineering services are required, an RFP is prepared and may be publicly advertised. For services that may be very specialized, several appropriate firms may be invited to submit a proposal which would include information on their past experience, references, and current staff credentials. They would also submit hourly rates for the individuals that may be working on the project and how many hours and cost to complete the project. A departmental committee is assigned to review the various submissions and make recommendations to the commissioner of the department who then makes a final recommendation to the Procurement Commissioner for the final decision.

When the Procurement Department receives a request for a quantity of items, they may be asked to get quotes on a per unit basis or a lump sum. If the product needed has a definable quantity (500 bullet proof vests), bids may be solicited on a lump sum basis. If the quantity needed of an item (a few tons of road salt, which has been in quite high demand recently) is indefinable, a price per ton may be solicited with an approx. quantity provided with no guarantee of amount to be purchased. Often the Procurement Department runs into issues on items like this due to lack of planning and poor communication between city departments. They often do not have the time to effectively source these products and services which of course translates into wasting our tax dollars.

One of the pitfalls the Procurement Department has run into with product ordering has been computers and software. Every department was ordering what they thought they needed and the Procurement Department was slow in responding. The industry has been changing so fast, that equipment was obsolete by the time it was delivered. At some point, an IS&T (information services & technology) unit was established to review and determine computer and software needs for the entire city.

I will discuss some of these issues further as well as specifics on the city’s sourcing process and how it can be improved in later posts.

Hopefully the city can identify these issues and improve on them so our tax dollars are spent a little more wisely in the future
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Nick Haneiko

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