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1, ihE Memo To: Pat Trudgeon, Interim City Manager From: Chris Miller, Finance Director Date: August 28, 2013 Re: Overview of a Centralized vs. Decentralized Purchasing Function Attachment A Background At a recent City Council meeting, a councilmember suggested that the City should consider switching to a more centralized purchasing function. While the councilmember did not cite specific reasons why they felt that a switch would be beneficial, I thought it would be purposeful to provide a brief overview of two different purchasing approaches to be used for future discussion. The remainder of this memo highlights the general advantages and disadvantages of a centralized and decentralized purchasing function, along with an overview of the City's purchasing structure. Centralized Purchasing Function Under a centralized purchasing approach, purchasing policies and procedures are standardized to ensure consistency across all organizational functions. This also tends to limit the ability of individual units or individuals themselves from establishing separate procedures that may be subject to a lesser amount of scrutiny and oversight. A centralized purchasing approach typically includes a purchasing manager that is equipped with specific education and skillsets that are conducive to effective purchasing decision making. The purchasing manager is tasked with establishing procedures that maximize the value to the City by taking advantage of bid pricing, discount programs, grant opportunities, etc. The purchasing manager is also tasked with ensuring that purchases are in conformance with all state and in some cases federal, statutes. Decentralized Purchasing Function In a decentralized purchasing approach, the purchasing function is more heavily dispersed within separate organizational units. This approach is designed to promote a faster response to operational needs and places budgetary accountability on the individuals that are utilizing the purchased goods and services. This is not to suggest that purchasing controls are absent under a decentralized approach. All purchases, regardless of who initiates them must adhere to state statutes and internal purchasing policies. However, under this approach there would be no one single individual or department that has in -depth knowledge about all City purchases.