The source of suppliers for materials or services can have an important impact on the procurement process. Obviously, the number of viable sources of supply can have a direct impact on a number of elements affecting the procurement process including price, delivery time, quality, and availability of other services, including repair and maintenance.

In the case of a commodity where there is a large base of potential suppliers, the municipality will have a much greater opportunity to influence the price and other elements of the procurement process. One major decision to be made in the case of a large base of suppliers is to determine the best purchase technique to use in initiating the purchase. Sometimes the purchase technique will be determined by pre-established guidelines or statutes — such as the $10,000 level at which sealed bidding is required by statute in some states. At other times, the best purchase technique will be at the discretion of the municipal staff and influenced by factors such as the item being purchased, complexity of the need, time available and need for follow-up services.

One issue in source selection that can influence the municipality's procurement is the decision regarding to what extent it is desirable to use local vendors. This decision should be approached deliberatly since any policy in this regard will impact the economic and political environment in which the municipality must operate. Any policy on the use of local vendors should have as its goal the best interests of the municipality as a whole. There are potential advantages as well as problems of political and ethical correctness in deciding to buy locally. Great care must be exercised to see that no favoritism is shown to a particular vendor to the disadvantage of other local vendors. Care must also be taken to insure that all vendors are treated equally. If prices are basically the same from two suppliers for the same items, then the business should be distributed as equally as possible.

As an aid to considering the degree to which purchases should be made locally, we have provided below a brief summary of the pros and cons of using local vendors as a source of supply. We have also provided several suggestions for keeping local vendors competitive. We hasten to add that, price and other factors being equal, there should be no hesitation to use local vendors as a primary source of supply.

PROS:
The advantages of using local vendors as sources of supply are evident. Often local business owners are the people that support the community, by paying taxes and voting on referendums. Local purchases can also provide built in economies in the form of availability, cost of ordering, delivery time and services. A local vendor may supply service to the municipality that a vendor out of the area may not be able or willing to provide.

It would be beneficial for all municipal departments to be sensitive to these considerations while evaluating what is best for the municipality.

Local Support: In order to sustain a healthy local economy, it is critical to have an ongoing source of tax based revenue. Local businesses are a potent source of funding for municipalities in two ways. First, there is the sometimes considerable property tax that is paid in support of the local community. Secondly, to the degree that employees are from the local community they provide tax support both by payment of property tax as well as through expenditures made with other local businesses. Therefore, to the degree municipalities can do business with local vendors they are helping to sustain the level of services that can be provided by the local government.

Miscellaneous Purchases: Local vendors are perhaps best able to supply small miscellaneous supplies at the most economical cost. Even if a local vendor does not benefit from discounts available to larger suppliers or distributors, they may be able to offset such a disadvantage by the savings available in terms of greater inventory turnover and reduced delivery costs. These items might be nails, bolts, a hammer or shovel. The municipality may want to consider annual contracts for small items after obtaining quotes from local vendors.

Cost of Ordering: The cost of ordering from local vendors can be considerably less than those associated with non-local sources. One basis for this lower cost is the fact that the local vendor may have a less formal ordering procedure than that involved in dealing with non-local sources. For example, a local vendor may be willing to work with a line of credit authorized by the municipality. Another frequent method of ordering from local sources is through the establishment of a blanket or open order procedure for the purchase of miscellaneous requirements of small dollar items. Another vehicle for reducing ordering cost is suggested below under suggestions for keeping local vendors competitive.

Availability: There are distinct advantages in purchasing locally when the vendor is located just a few minutes away from the job site. An additional advantage is that a local vendor may be more willing to make special stocking arrangements in order to satisfy the municipalities material needs.

Delivery Time: Cost of freight and time to obtain the requirement are reduced and these costs can add up to appreciable amounts of money throughout the year. Due to the proximity of a local vendor, it is also possible for the municipality to arrange to pick up needed materials in cases of emergency.

Extra Services: Local vendors may be more likely to

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supply repair service or replacement of items at little or no cost. The local vendor may also deliver at no charge and within a few hours. Better payment terms may also be available from local vendors. Most local retailers will be happy to discuss special discounts and terms with municipal officials.

CONS:
The disadvantages of using local sources of supply are somewhat more subtle.

Potential for Unethical Practices: Municipal employees and department heads need to be aware of the possibility of discounts or kick backs to employees that purchase from local vendors on a regular basis. Small purchase programs, if uncontrolled, can lead to unethical practices. No municipal employee should be allowed to accept gratuities or preference on personal purchases from local vendors for placing business with them. It is easy to start a seemingly harmless practice that will come back to haunt the individuals responsible for the purchases and the municipal administration.

Potential for Higher Costs: Some instances of local purchasing may lead to higher unit costs. Local vendors may not be able to give the best price, to provide the quickest delivery on non-stock items, or to offer the repair service necessary on particular items.

Competitive Pricing: Competitive pricing might be obtained by seeking a discount off the list price for all items purchased from a single vendor. Possibly, a sliding scale might be arranged with 10% off on the first $5,000 and 12-15% off on purchases thereafter. These prices would be available to all municipal departments.

Small Order Procedure: The use of a small order program, such as a Field Purchase Order, can reduce the administrative cost of order from local vendors since such a program eliminates the additional handling required in the preparation of a standard Purchase Order form.

When coupled with a control numbering system, the use of a Field Purchase Order will maintain the municipality's ability to track and monitor such purchase in order to insure compliance with ethical standards and municipal policies.

When we consider that our local vendors are our community and taxpayers, it is always desirable to do as much business with them as possible, bearing in mind that they must be able to offer an economic advantage over non-local vendors. Procurement practices must be ethical and no partiality may be shown to one local vendor over another, other terms of the purchase being equal.

Mr. Knox and Mr. Delanty are both Certified Purchasing Managers (C.P.M.) and Principals in Professional Purchasing Consultants, Inc., 100 Hickory Drive, R.R. I, Box 195, Villa Grove, IL. 61956. The firm specializes in procurement consulting services to municipalities and other governmental units. Both Mr. Knox and Mr. Delanty are members of the Illinois Association of Public Procurement Officials and Senior Buyers at the University of Illinois in Urbana.

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