Purchasing Efficiency and Staffing Benchmarks: A County Government Study

INTRODUCTION The dilemma of how to measure purchasing performance has plagued the industry's professionals for more than 60 years.[1] The impact is significant; the difficulty of purchasing performance measurement was cited early as one of the factors that not only delayed management's recognition of the function but also restrained the compensation levels of purchasing practitioners.[2] In recent years, the National Association of Purchasing Management (NAPM) has established a continuing research program in the area of performance measurement. In conjunction with Arizona State University, NAPM's Center for Advanced Purchasing Studies conducts a series of industry benchmarking projects to develop staffing and efficiency data. However, the studies completed to date are limited to private sector industries, where the range of purchased commodities often is narrower and more predictable than in public sector operations of a comparable size and volume.[3] Historically, the private sector has routinely gathered and analyzed purchasing data in detail, to support product costing and profit calculations, but governments, without those motives, track few outputs and conduct little, if any, analysis. Most surveys of federal, state, and local government purchasing that have been completed in the last two decades have focused on purchasing practices, examining competitive thresholds, socioeconomic and environmental initiatives, preference-driven buying, and so forth, to the exclusion of examining trends in productivity, efficiency, or other measures of the performance of the purchasing job itself.[4] Recent surveys by the National Institute of Governmental Purchasing (NIGP) have demonstrated again that meaningful purchasing efficiency data are difficult to gather from the public sector. Straightforward requests for ratios, such as the mean cost to place a single purchase order (order cost), have yielded widely dispersed results, largely because respondents employ a variety of purchase order types and lack consensus on the definition of the term.[5] This lack of data has given support to the belief, as expressed by one authority, that "no single set of standards or measurement techniques can be used" to evaluate public purchasing performance.[6] Current fiscal pressures, however, compel the public purchasing community to seek one or more "conceptually simple, comprehensive, and appropriate" measures that will be useful not only to assess unit performance but also to support requests for staff, space, and budgets in an increasingly competitive fiscal environment.[7] As the tax-averse climate continues to restrain the size of local governments, public procurement units will increasingly be required to justify their resources by quantifying their role in managing material resources and contracted services, and their impact on controlling government costs. Especially useful would be standard reference points for per-unit department cost efficiency, and bases for evaluating buyer workload. REVIEW OF PREVIOUS STUDIES In 1976, more than 200 purchasing performance measures were identified in 18 U.S. organizations through a study conducted by Michigan State University, under a National Science Foundation (NSF) grant. That study concluded that there was "no one best way of measuring purchasing performance," but that "a few narrowly defined measures," including a ratio of budgeted inputs to purchase volume called cost per dollar obligated (CPDO),(*) could be effective if employed consistently and in the proper context.[6] Benchmarking: The CAPS Reports Beginning in 1990, pressures from the economic downturn sparked renewed interest in quantitative assessment and the Center for Advanced Purchasing Studies (CAPS) began publication of its series of benchmarking studies. These essentially external measures are based on comparisons of data from firms in a given industry, such as aerospace/defense, appliances, banking, chemicals, computers/telecommunications, food manufacturing, petroleum, pharmaceuticals, semiconductors, and transportation. …