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TEXAS AGRICULTURAL EXPERIMENT STATION

A. B. CONNER, Director
College Station, Texas

BULLETIN NO. 653 JULY 1944

PURCHASING IN TEXAS COUNTIES

H. C. BRADSHAW and E. J, HERVEY

Division 0f Farm and Ranch Economics

 

AGRICULTURAL AND MECHANICAL COLLEGE OF TEXAS
GIBB GILCHRIST, President

D-21-744-4500

The use of good purchasing procedures in a number of Texas
counties is reducing the cost price of materials, supplies and
equipment by 15 to 20 per cent annually. If each of the 254
counties used equally good procedures, the total savings would
amount to $5,000,000 or $6,000,000 per year. Of this total, ap-
proximately $3,500,000 would be due to reductions in the cost per
unit (as per gallon or pound), and the remainder would be at-
tributable to reductions in the total quantities used. On this
basis, the savings which are possible approximate 10 per cent of
the annual cost of county government in Texas in recent years.
The reliability of these findings as to savings is well supported by
the fact that numerous studies in other states have revealed sub-
stantially the same percentage savings.

The extent to which the total possible saving is being realized,
in Texas, is unknown since all counties could not be studied. It is
known, however, that various counties in all sections of the state
are purchasing materials, supplies, and equipment at good prices.
In view of this fact, counties that need to improve their purchas-
ing should be able to locate a reasonably good pattern in one or
more of their neighboring counties.

This study also demonstrates that uniformly good results can
be secured even though the methods followed vary considerably
from one county to another. For example, some counties attempt
to purchase all items locally, while other counties do not; some
counties take a great many formal bids, while other counties take
very few such bids; some counties center controls over purchasing
in one official, while other counties exercise similar controls
through the Commissioner’s Court, as the general governing board.
The explanation is that all of these counties having differing sys-
tems are nevertheless applying certain essential principles in
han-dling their purchasing of materials, supplies and equipment.
In each case, a responsible official—or the governing board-
studies the needs of the county, compares the prices paid in va-
rious counties for items of comparable quality, checks to deter-
mine which products serve their needs to best advantage, listens
carefully to the representatives of responsible companies, learns
to recognize a good price as soon as it appears, buys only the
quantity and quality required for the particular need. and takes
delivery in the most economical manner. A

Perhaps the manner in which delivery is taken deserves addi-
tional attention. For example, this study indicates that all
counties taking delivery of gasoline in tank wagon lots, can secure
approximately the same price per gallon, despite the fact that the
total gallons used during the year may vary widely from one
county to another. This is an extremely important point for it
means that the quantities used by small counties are large enough
to secure almost the same reduction in price per gallon as the
largest counties can secure. Of course, this finding does not apply
directly to all the items purchased by Texas counties, but it does
apply to a great many of them.

Unquestionably, the purchasing done by Texas counties has
improved a great deal during the last few years, a result for
which the local officials themselves are largely responsible. The
fact that improvements have come through a variety of methods is
extremely encouraging, for it means that local officials can devise
their own procedures and make them work effectively. All this
and more too, can be accomplished under existing laws-—without
any change whatever.

PURCHASING IN TEXAS COUNTIES
by
H. C. Bradshaw‘ and E. J. Hervey‘

The use of a good purchasing system is one of the most effective
methods of controlling county expenditures. Experience in Texas and else-
where indicates that price reductions obtained through the utilization of a
good system as compared with a poor system, ordinarily amount to 15 to
20 per cent of the total annual cost 0f items purchased.” At the same
time savings made in purchasing individual items of material, supplies,
and equipment often range from 10 t0 40 per cent. In terms of dollars the
current expenditures of the 254 counties for materials, supplies, and
equipment range from $16,500,000 to $18,000,000 annually. This amount
equals 25 to 30 per cent of the $55,000,000 t0 $60,000,000 which counties
have expended annually in recent years. ‘

On the basis of the foregoing figures, it is evident that good purchas-
ing procedures as opposed to poor procedures should have at least $3,-
500,000 annually in Texas counties in the form of price reductions alone.
In addition, it appears that reductions in quantities used which accompany
a good purchasing system may be equally important in terms of dollars.
Thus the total possible saving may be estimated on a conservative basis
at $5,000,000 per year. Of course, a good many counties have already in-
stalled adequate systems and are therefore securing their proportionate
parts of these total savings, but others have hardly begun to study the
possibilities involved.

Sources of Information and Method of Handling

In collecting these data, the purchasing records in the four counties of
McLennan, Grayson, Brazos ,and Young were examined in detail. In these
counties an exhaustive analysis was made of bids taken for road and
bridge and general county purchases. In addition, the use of specifica-
tions, and the practices followed in checking compliance with such specifi-
cations were carefully studied.

Following this detailed examination in four counties, purchasing pro-
cedures were studied in considerably less detail in the following counties:
Wharton, Waller, Liberty, Milam, Anderson, Harrison, Kaufman, Dallas,
Tarrant, and Eastland. By this means a sample representing a large part
of the state was finally derived.

In addition, the laws relating to county purchasing were examined in
order to determine which officials are responsible for the purchasing of
materials, supplies, and equipment. In general the responsibility may be
said to rest upon the Commissioners’ Court, as the governing board of the
county. But in carrying out this responsibility, the Court may delegate
authority to the county judge, the county auditor, the county engineer, or
to all such officials. Although opinions differ as to the exact meaning of

‘Economist in Farm Taxation, Texas Agricultural Experiment Station, A. & M. College of
'1I‘9ezf2as. Mr. Hervey served in this position while Mr. Bradshaw ‘was on leave in 1941 and

‘YCounty Purchasing, James W. Nicholson, National Association of Purchasing Agents, 11
Park Place, New York City, 1940.

 

4 BULLETIN NO. 653. TEXAS AGRICULTURAL EXPERIMENT STATION

the law insofar as specific procedures are concerned, there is no doubt that
the law will permit the use of the best-methods that can be devised. For
this reason, no attempt is made to prsent a detailed analysis of the law.

The exact organization for purchasing varies a great deal from one
county to another. This variation is partially explained by the organiza-
tion of the county government itself, but other factors influence the situa-
tion materially. In four counties, namely, Dallas, Tarrant, Harris, and
Jefferson, a purchasing agent is appointed in accordance with the laws ap-
plying to these counties. In the 90 counties having county auditors, the
auditor is frequently responsible for purchasing, or a substantial portion
of it, in accordance with the will of the Commissioners’ Court. This leaves
168 counties in which the Commissioners’ Court must be directly respon-
sible for purchasing procedures through its duty of approving the expenses
of each county office each month.

Good Purchasing Procedures Defined

A good purchasing system is one that is simple enough to be under-
stood, flexible enough to be used under varying conditions. and good
enough to accomplish the major objectives. A system of this kind recog-
nizes that some one person or board should be responsible for a highper-
centage of the purchasing. Otherwise each employee must become an ex-
pert in order to secure good prices. Further, such a system recognizes
that bids must be secured in one way or another if competition, so neces-
sary to a realization of reasonable prices, is to be secured. At the same
time it is granted that bids may be taken by personal contact and by
telephone, as well as the more formal methods involving advertising.
Finally, such a system recognizes that emergencies do occur and that
some leeway must be allowed in order that responsible employees may
keep equipment moving. The provision for emergency purchases is, there-
fore, a part of all good systems.

The major objectives of a good purchasing system are three in num-
ber, (1) ‘to secure only the materials, supplies, and equipment needed; (2)
to secure only the quality necessary to satisfy the particular need; and,
(3) to secure the lowest possible unit prices. In accomplishing these
objectives it is necessary to carry out a number of procedures which fol-
low each other in chronological order:

1. It must be determined that the item requested is actually needed,
and that it cannot be supplied from any stock on hand. Then the product
desired must be described in such exact terms that misunderstandings will
not arise. Specifications on many commodities are now available from
the U. S. Government, from a number of companies and associations 0f
companies, and from state and local governments.

2. The budget accounts should be checked to see if the money is
available. One of the most convenient methods is to require the submis-
sion of a requisition which must be approved by the county judge, or the
county auditor before the purchase is made. Unless some such procedure
is followed, the budget officer will never know exactly how much of the
cash an hand has already been encumbered.

3. Next in order is the job of bringing your wants to the attention of
the companies which can supply them. This may be accomplished through

PURCHASING 1N TEXAS COUNTIES _ 5

personal contacts, telephone calls, newspaper advertisements, or by per-
sonal letters—depending on the circumstances involved. On some occasions
it may be necessary to take a second set of bids in order to secure actual
competition.

4. Granting that these procedures have been followed and the ma-
terials have been received, someone must be responsible for examining
them and certifying that they meet the specifications agreed upon. Other-
wise the value of specifications may be lost. In this process the use of
testing laboratories may assist a county greatly. For example, McLennan
County uses the services of testing laboratories in purchasing such prod-
ucts as asphalt and creosoted timber. The prices of such services are
quite reasonable and they offer a great deal of protection to the county.
An additional advantage is that experienced salesmen do not argue the
case when confronted with a report from a recognized testing laboratory.

5. The claim which is submitted should be itemized in detail so as to
show the person for whom the purchase was made, the date of the trans-
action, and the description of the item. All this is necessary in order to
avoid confusion and overpayment of claims. For the same reasons it is
absolutely essential that claims be compared with the contract prices
agreed upon. For example, a good many years ago McLennan County
paid a claim for $2335 which was $942 in excess of the amount which
should have been paid under the contract price. Needless to say, this
could not occur under the system which has since been established in Mc-
Lennan County.

6. Insofar as possible all purchases should be paid in cash and ad-
vantage should be taken of all cash discounts. In McLennan County
these discounts range from $60 to $100 per month. In Harris County, the
county auditor reports that cash discounts taken are sufficient to pay all
operating costs of the purchasing department. These items amount to be-
tween $8,000 and $10,000 per year.

7. All exemptions from federal taxes should be claimed. The pro-
cedure by which these exemptions are secured varies somewhat but in-
formation can be secured from county auditors, county judges, and pur-
chasing agents.

“Most of the federal excise statutes provide means whereby govern-
ments and government agencies may establish their exemption status and
at the same time relieve the manufacturer or seller of the tax liability, or
let him recover the amount of the tax if he has already paid it.

“Purchases by the municipality are exempt from all the manufac-
turers’ excise (federal taxes on vehicles, gasoline and oil, tires and inner
tubes, radios, electric energy, firearms and ammunition, etc.), from the
retailers’ excises (on furs, jewelry including clocks and toilet prepara-
tions), and from most of the miscellaneous excises on telephone and tele-
graph services, transportation of persons and property, automobile use,
etc?”

“Municipal Exemption from Federal Excises, by Donah Hanks, American Municipal Associa.-
tion, Washington, D. C. (Published in the Supplement to The Bourough Bulletin, Penn-

sylvania Government Administration Service, November, 1943. Publication office at 3437
Woodland Avenue, Philadelphia, Pennsylvania.

6 BULLETIN NO. 653. TEXAS AGRICULTURAL EXPERIMENT STATION

In this connection it is a good idea to require that the federal tax be
stated separately on bids and invoices, but if that is not done, the buyer
can compute the tax if he has a schedule of the rates which apply.

Along with the foregoing points it hardly needs emphasis that pur-
chasing officials should always be fair and Square in their dealings with
the companies which‘ supply the county’s needs. In many instances the
representatives of reputable companies provide information which protects
the county and conserves its money. One desirable policy which is fol-
lowed in McLennan County is to furnish each company with a tabulation
of the bids received which indicates the successful bidder. This is more
than a courtesy for it assists in securing reasonable prices in the future
by keeping the companies informed.

Purchasing in McLennan County, Texas

In view of the fact that the analysis in McLennan County was more
complete than that in other counties, and in view of the further fact that
McLennan County has an excellent system, considerable attention will be
devoted to this one county.

In the first place, the system followed is nothing more than the sys-
tem outlined in the general laws of Texas. These laws make the Com-
missioners’ Court responsible for all county purchasing. In exercising this

* authority, the Commissioners’ Court of McLennan County utilizes the

services of the county engineer in preparing specifications for road and
bridge purchases as well as general county supplies of an engineering
nature. Further the court depends upon the county auditor to prepare
specifications for general county purchases and to handle the small stock
of supplies which are kept on hand. In addition, the county auditor is
responsible for preparing and publishing advertisements for bids, and for
keeping the accounts and records required by the purchasing process.

The second feature of the McLennan County system which deserves
special attention is that it is a “complete” system which is applied to all
purchases required for general county and road and bridge work. This
aspect of completeness is a decided contrast to the situation in many
counties in which good procedures are applied to some purchases but not
to all. (Of course the fact that good procedures exist with respect to
certain purchases is an indication that officials are making efforts to de-
velop improved practices. It is to be hoped that the good results obtained
in one type of purchasing will call attention to defects which may exist
in the purchase of other supplies and thereby encourage expansion in the
use of good procedures.)

A third feature of the McLennan County system is the extensive use
of contracts. In the case of road and bridge work, annual contracts are
made for the purchase of the following commodities: gasoline, oil, kero-
sene, Diesel fuel, and asphalt. In addition, contracts were formerly made
for the washing and greasing and repair of automotive equipment, but the
majority of this work is now being handled by county employees at the
new county garage. In addition to these annual contracts, quarterly con-
tracts have been made for the purchase of tires and tubes, and grader
blades. In the case of all these contracts delivery has been taken as
needed throughout the year.

 

~4

PURCHA§ING IN TEXAS COUNTIES

Extensive use has also been made 0f contracts in general county
purchasing. Annual contracts are made for the purchase of record books,
letterheads, miscellaneous stationery items, drugs, laundry work, electric
light bulbs, and milk. Quarterly contracts are made for the purchase of
bread for the county farm and jail, and monthly contracts are made for
the purchase of groceries and meat for these two institutions.

The use of contracts has a number of possibilities which probably
need little explanation. Certainly any savings which can be secured
through increased volume is made possible through the contract system.
Secondly, the use of contracts encourages officials to prepare definite
specifications which protect both the buyer and the seller. In the third
place, the paper work involved in purchasing is reduced by a tremendous
percentage. One example will explain this situation rather completely. In
McLennan County one company is paid once each month for the 20,000 to
25,000 gallons of gasoline on which delivery is taken. In contrast to this
procedure the gasoline purchased by a county of similar size in North
Texas is paid for by approximately 20 warrants each month or a total of
more than 240 warrants per year. The difference in the amount of work
involved is even larger than one might at first suppose because of the
large number of prices involved. For example, one company which sold
gasoline to three of the four precincts in this county used 17 different
prices during the year 1940. In many instances these prices varied only
by $4; or 1/; of a cent. The point is that the auditing, warrant writing
and record keeping requires just as much time for a 10-gallon purchase as
for a 10,000-gal1on purchase of gasoline.

One other aspect of the purchasing problem which is well illustrated
by experience in McLennan County is that both the physical and cash
volume of purchasing can be reduced appreciably by good administrative
methods. In the case of road and bridge purchasing the amount of ma-
chinery required for maintenance has decreased considerably as the mileage
of all-weather surfaced roads has increased. Furthermore, the practice of
keeping machinery oiled, painted, and repaired has reduced demands for
new machinery because employees remain satisfied with well-kept equip-
ment.

In the second place, McLennan County has not hesitated to purchase
second-hand equipment when the price was right. County Engineer
Hannah’s detailed budget reveals that several items of equipment pur-
chased second-hand a number of years ago are still in use.

As another instance of the same fact, it may be pointed out that the
use of creosoted timber has reduced the total expenditures for bridge lum-
ber a great deal. According to the engineer’s records of performance,
creosoted timber will last at least four times as long as untreated timber.
For example, assuming a purchase price of $60 per thousand board feet
of treated timber and a price of $45 per thousand for untreated timber,
and further assuming a labor cost of $10 per thousand board feet, the cost
of bridge work per thousand feet of lumber would be $70 in the case of
treated lumber and $220 in the case of untreated lumber. These figures
apply to a period of time measured by the life of a treated lumber struc-
ture.

 

8 BULLETIN NO. 653, TEXAS‘ AGRICULTURAL EXPERIMENT STATION

In tabular form these figures appear as follows:

Treated Untreated
Item Lumber Lumber
Bridge Bridge
Lumber-original construction $60.00 M.B.F. $45.00 M.B.F.
Labor Cost per M.B.F. 10.00 10.00
Lumber——First rebuilding 45.00
Labor—First rebuilding 10.00
Lumber—Second rebuilding 45.00
Labor-Second rebuilding 10.00
Lumber-Third rebuilding 45.00
Labor——Third rebuilding 10.00
Totals $70.00 $220.00

In passing it should be emphasized that the progressive practices
which have been described must to a considerable degree account for the
fact that more than 85 per cent of the county roads in McLennan County
are all-weather surfaced.

Purchasing in Other Texas Counties

Some of the experiences of counties other than McLennan in purchas-
ing various types of materials, supplies and equipment are briefly pre-
sented in the following pages. The list is not exhaustive for any county,
since the space available allows only a few items to be mentioned in each
county.

Kaufman County

In Kaufman, Texas, the county auditor purchases stencils and simi-
lar supplies from the Burroughs Company at a discount of 40 per cent
from list price. This discount is secured on the grounds that the com-

pany makes the same price to the U. S. Government. The auditor pur-g

chases all small printing and stationery supplies from local firms at cost
plus 10 per cent. Under this arrangement all such items are purchased
locally, whereas, in the past, much of this business has gone to firms out-
side the county. The effectiveness of this system is evidenced by the fact
that he has been asked. to purchase similar supplies for several of the
banks in that area.

The principle of substitution was also emphasized by the auditor when
he pointed out that a commercially made flexible cover for an office desk
cost $10 or $11, whereas, a cover made from battleship linoleum secured
from a local dealer and having almost identical appearance and service-
ability, cost only $3.50 per desk. I

Anderson County

In Palestine, the county auditor emphasizes the desirability of stand-
ardizing certain supplies. For example all officers use the same brand of
stencils-—which, incidentally, are purchased from the Steck Company at a
discount of 331/3 per cent. Similarly the Royal typewriter is used in all
offices. Just a few weeks before the freeze orders were issued, Anderson
County purchased six new Royal typewriters at the discounted price al-
lowed governmental agencies. In addition the company rebuilt the six old
machines free of charge. The auditor says that standardization simplifies
handling and aids in securing first class maintenance service on the part
of the company.

PURCHASING IN TEXAS COUNTIES 9

In common with several other counties, Anderson County has begun
the practice of printing some of the instruments most frequently recorded.
In one recent case which involved a large number of instruments executed
by the same company, the substitution of printing for typing saved ap-
proximately $100. -- a

Foreseeing the possibility of rationing and freezing automobiles, the
county was able to buy 10 trucks from one dealer at a cost of $25 per
truck above the delivery cost to the dealer. In the same manner a suffi-
Pient supply of tires to completely re-tire all equipment was secured before
th supply was cut off. The dealer from whom these tires were purchased
has since offered the county a profit of $800 to return the tires to him.

Milam County

In Cameron, Texas, the county auditor reports that careful attention
to purchasing has appreciably reduced the quantity of supplies used.
Since he has been county auditor, excess supplies or forms which are apt
to become out of date have not accumulated. His experience further em-
phasizes the fact that additional printing requirements on standard forms
causes a large percentage increase in cost. For example, a standard
volume for the District Clerk in which a few additional words were to be
printed at the top of each page was quoted to the county at prices ranging
from $66.50 to $85.00. The problem was solved by purchasing the stand-
ard book and cover for $35 and paying a local printer $7.50 to insert the
additional printing.

Grayson County

Until recently Grayson County followed the practice of purchasing
general county suppliesby the billboard method. Under this system, re-
quirements were posted weelily and those wishing to bid placed their
quotations in sealed envelopes and dropped them _in a box beneath the
bulletin board. This system has some real possibilities for it is both
simple and flexible. It worked well in Grayson County for a former
county auditor used to report annual savings of $15,000 to $20,000 on
purchases handled in this manner. This saving is equal to a reduction of
3 to 5 per cent in the total expenditures of Grayson County.

Brazos County

In 1939 Brazos County refused to accept the bids received for the pur-
chase of four maintainers, but the new bids secured and accepted com-
pared very favorably with prices paid by the State Highway Department
on much larger purchases. Furthermore, during his first year in office,
County Judge A. S. Ware was able to reduce the total costs of gasoline,
oil and grease by approximately 50 per cent. In dollars this reduction was
from $15,620 in 1938 to $7,872 in 1939. Since that time the total ex-
pended for these items has remained at the 1939 level despite the fact "that
the use of equipment has increased.

Dallas County

In Dallas County the county auditor reports that the installation of a
postage meter machine reduced the annual cost of postage by at least 20
to 25 per cent.

10 BULLETIN NO. 653, TEXAS AGRICULTURAL EXPERIMENT STATION

Eastland County

In Eastland County the development of a program of permanent roads
and bridges has resulted in significant savings. Under a W.P.A. program,
Eastland County built more than 1,000 rock and concrete drainage struc-
tures and graveled more than 300 miles of road. As a result the annual
cost of road and bridge “materials” has declined more than 50 per cent.
Here are the figures for all four precincts combined:

5 years—1930-1934—average annual cost

(Before the W.P.A. program) $17,600
5 years——1935-1939——average annual cost

(During the W.P.A. program) 8,600
3 years——1940-1942—average annual cost‘

(After the program) 7,667

If the program had included a larger portion of the county road system,
the saving would undoubtedly have been larger.‘

Harrison County

In Harrison County in 1941, second grade (regular) gasoline was pur-
chased in lots of 10,000 gallons at a price varying from 103/4 to 11 cents
per gallon. During the same year third grade gasoline was purchased in
the same quantities for 9 cents per gallon. Diesel fuel was costing 4.5
cents during the same period. Motor oil in 55-gallon barrels purchased in
lots of 50 barrels was costing 30 to 40 cents per gallon in 1941.

Liberty County

In Liberty County the county auditor reported in 1942 that the use
of a duplicating machine to print letterheads and office forms had saved
many times the cost of the machine which was $335.

Tarrant County

In Tarrant County, the purchasing agent reported the following prices A

in effect in 1943:

Motor oil S. A. E. 10, 2O and 30 at
Transmission grease in 200 pound drums 4.50 cents per pound
Gasoline (regular grade) 9.80 cents per gallon

All three items are purchased under annual contracts and
delivery is taken as needed.

Roller, track and other greases are purchased as needed
from various dealers at prices ranging from six to eleven cents
per pound.

Diesel fuel was costing 5.5 cents per gallon from an inde~
pendent company. The major companies had placed bids at six
cents per gallon.

25.25 cents per gallon

In addition, the county auditor reported that the use of a postage
meter machine had reduced the annual cost of postage by 25 to 30 per cent
more.

Wharton County

In Wharton County the county auditor reports that in 1942 second
grade (regular) gasoline was costing 12.5 cents per gallon. Motor oil in
various weights was costing approximately 40 cents per gallon. Diesel
fuel was costing 5.5 cents per gallon. (In 1940, however, Diesel fuel was

‘Possible Savings in Young County Government, by H. C. Bradshaw, September 1943,
Page 24.

 

PURCHASING IN TEXAS COUNTIES 11

costing only 4.75 cents per gallon). This Diesel fuel is tested and ap-
proved from time to time by a commercial testing laboratory.

In purchasing for the county jail and the poor farm the county buys
from 12 grocery stores. Under the procedure followed, each store is given
the entire business for a single month. Although regular retail prices are
paid on ordinary quantities, the stores make a reduced unit price on any
unusually large quantity. Each store makes such reductions as it sees fit
in accordance with an informal understanding to that effect. Judging by
an inspection of the bills for a period of several months, it appears that
the reductions on items purchased in quantities of a case or more would
amount to 10 per cent or more of the total monthly bills involved. In
addition, a large proportion of the meat for the county jail and poor farm
is purchased at wholesale prices.

In the case of the county hospital at El Campo, all purchasing of food
stuffs is done at wholesale price levels.

The use of a prefabricated concrete culvert in two precincts has also
saved large amounts, according to the county auditor. The cost of these
culverts is approximately the same as the cost of creosoted timber culverts,
according to the county records. Since 1938, approximately 800 of these
culverts have been installed in two of the four precincts. In addition,
these twoprecincts have between 300 and 400 creosoted timber culverts.

Waller County p

Although no figures on unit costs are presented for this county a
study of the county finances over a period of years indicates that the in-
stallation of sound purchasing procedures has made a considerable saving
of money. In round numbers this county has a population of 10,000 per-
sons and an assessed valuation of $10,000,000. These figures have changed
little since 1920, except for the important fact that the assessed valuation
increased from $6,620,000 in 1942 to $10,000,000 in 1943. On December 31,
1939, the county had overdrafts in 5 current funds, many claims were long
overdue, road and bridge warrants were discounted 8- per cent or more,
and firms increased their prices in order to compensate for the discount.
In December 1939, the District Judge appointed a county auditor at the
request of the Commissioners’ Court. Since that date, the financial con-
dition of the county has steadily improved as the Commissioners’ Court has
acted upon the facts reported through the accounting system developed by
the county auditor. At the end of 1943 all overdrafts had been eliminated
and substantial cash balances had been achieved.

While no single factor accounts for all the improvement, it_ would be '

difficult to overestimate the part played by the installation of an adequate
purchasing system. The Commissioners’ Court is the purchasing agent
for the county, but no purchase is made until a requisition is approved by
the county auditor. This makes possible the maintenance of budgetary
control. Finally, all claims are required to be itemized in detail and each
claim is carefully audited before it is paid. (The change from poor to
good procedures is quite recent in this county and the officials bore the
picture clearly in mind. For this reason Waller County would be a good
one for other local officials to study.)

12 BULLETIN NO. 65s, TEXAS AGRICULTURAL EXPERIMENT STATION
Young County

On the basis of a detailed examination in Young County, it is con-
servatively estimated that the same quantities of material and supplies

purchased in 1942 could have been purchased for $8,225 less money. In ‘

addition it was found that possible reductions in the quantities purchased
would more than equal the reductions possible through lowered costs per
unit.

In summing up the total savings which might be made without alter-
ing the number of services or the organization of county government, it
was found that purchasing procedures affected virtually all items. Di-
rectly or indirectly purchasing accounted for more than $16,000 of the
$35,073 which could be saved annually. Since this total saving approxi-
mated 13 per cent of the total county disbursements in 1942, it is evident
that improved purchasing alone could reduce the annual disbursements
about 5 per cent. Here is how the $8,225, which could have been saved by
reductions in unit costs, is derived:

Annual
Saving
‘-. Faings in purclasiiig general county materials
and srujaplies; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Savings in I-Eoad and Bridge purchasing:
(a) llfiring cash for machinery . . . . . . . . . . . . ..$l,000
(h) Reduced unit costs:
Gasoline . . . . . . . . . . . . . . . . . . . . . . . . . ..$225

Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 500

(I-rease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Diesel fuel . . . . . . . . . . . . . . . . . . . . . . . . .. 200 1,125

(c) Parts and repairs . . . . . . . . . . . . . . . . . . . . . . .. 4,000

Total Savings in Road and Bridge Purchasing . . . . . .. 6,125

Total Savings in Young County Purchasing . . . . . . . . . . .. $82255

$2,000

Purchasing in Small Counties

The foregoing remarks have dealt largely with counties of average
size or larger as measured by population and assessed valuation. The
majority of these counties have auditors who have done much of the pur-
chasing themselves, or have exerted a wholesome influence through the
processes of budgetary control.

The situation in the smaller counties which do not have auditors is
considerably different and even more difficult than in the larger counties.
Nevertheless, the general purchasing laws can be administered effectively
in the smaller counties just as they are in McLennan and other counties
which have been mentioned. The Commissioners’ Court, through the
county judge as presiding officer, should accept its legal responsibility and
become the purchasing authority in fact, as well as in name. In carrying
out this responsibility, it is necessary for the Commissioners’ Court to
exercise a high degree of control over the budget. If necessary, arrange-
ments should be made to employ a county auditor, or at least to employ
an accountant or a bookkeeper who will keep the Court fully and accurate-
ly informed as to finances. The members of the Commissioners’ Court can
hardly be expected .to do a reasonably good job unless they have the facts
before them.

5Possible Savings in Young County Government, by
Page 42.

H. C. Bradshaw, September 1943,

PURCHASING IN TEXAS COUNTIES 13

If the county has registered script outstanding, every possibility of
eliminating the script and reaching a cash basis should be investigated.
The continuation of the script basis is costly from every standpoint. As
long as it continues, the purchasing power of the county dollar is sub-
stantially reduced, for each company and individual must discount the
county’s warrants. In these counties, the necessity of developing and
maintaining a good accounting system is especially important. Without
adequate accounts it is almost impossible to execute any plan through

, which a cash basis can be achieved. Furthermore, in the absence of good

accounts, individuals and companies may be unable to determine the ap-
proximate date on which warrants will be cashable at face value, and
therefore, penalize the county an additional amount in return for the risk
they are taking.

In connection with the purchasing of stationery, printed forms and
bound books, the stationery and printing companies have been forced to
raised prices in counties having floating warrants outstanding. The sales
manager of one large company reports that his company had never in-
creased prices more than 10 to 20 per cent although he understands that
some companies have increased their prices as much as 30 per cent in
the case of counties in especially bad financial condition.

In March, 1943, this company was applying the following" special ‘terms
to 21 counties over the state.

(a) In five counties salesmen were instructed to increase the price

10 per cent.

(b) In five counties salesmen were instructed to obtain cash with the
order. '

(c) In eleven counties salesmen were instructed not to accept general
fund warrants under any conditions. In these counties no sales
were to be made unless cash available in special funds, if any, was
definitely obligated for the payment.

In 1942, this company attempted to bring its accounts up to date, and
in doing so, made substantial discounts to several counties—thereby en-
abling them to pay outstanding claims. The sales manager feels that in
several instances the stationery companies have probably exerted a whole-
some influence on county finances.“ This is undoubtedly true in the case
of this company, as well as several others.

In view of the fact that the major stationery and printing companies
use substantially the same increases in prices in dealing with counties in
poor financial condition, it must be evident that in these counties, the
achievement of a cash basis would save at least 10 per cent in purchasing
stationery and similar supplies.

‘Information obtained through interviews.

 

14 BULLETIN NO. 653, TEXAS AGRICULTURAL EXPERIMENT’ STATION

SUMMARY AND CONCLUSIONS

In recent years the 254 counties in Texas have expended amounts
ranging from $55,000,000 to $60,000,000 annually. Of this total, something
like 25 to 30 per cent has been expended for the purchase of materials,
supplies and equipment.

On the basis of this study it is evident that the use of good purchas-
ing procedures as opposed to poor procedures will reduce the total cost
of items purchased by at least 15 to 20 per cent. In terms of dollars
these savings should amount to at least $3,500,000 annually. In addition,
the evidence indicates that the reductions in quantities used which ac-
company a good purchasing system may be equally important. At any
rate it is not too much to say that the total saving possible is at least
$5,000,000 annually.

This study also presents evidence that a good many counties are al-
ready securing their proportionate parts of the savings which can be
made. On the other hand, it is known that numerous other counties are
still purchasing in a haphazard manner which results in high prices and
excessive use of materials, supplies and equipment.

In general it seems that counties secure substantially the same unit
prices on various commonly used items, provided they follow the same
or similar practices. In this connection it appears that the price per unit
is largely dependent upon the volume in which delivery is taken, and that
the total quantity used during the entire year has relatively little effect.
Hence, the officials of each county should compare notes with other
counties in order to determine the quantities in which deliveries should be
taken in order to scure reasonably good competitive prices.

The manner in which this principle operates is illustrated rather well
by the fact that counties purchasing gasoline in tank wagon or larger lots
pay approximately 12 cents per gallon for the regular or second grade.
This is the same gasoline for which the individual pays 18 cents or more
at the filling statoon. Similarly, the price of diesel fuel in quantities of
one barrel or more is approximately five cents per gallon.

Much the same thing seems to apply in the cast of oils and greases
inasmuch as purchases of reasonable quantities from standard companies
always result in considerable reductions in cost. But the amount of the
reduction varies considerably and the indications are that volume does not
entirely control the situation. That is, the purchasing procedures followed
must have affected the cost of oil about as much as the volume purchased.
Figures from six counties for 1940 indicate that the following prices per
gallon were paid for the best motor oil used: 32 to 35 cents; 34 cents; 43
cents; 45 cents; 64 cents; and 67 cents respectively. The lowest price was
under the annual wholesale contract in McLennan County, but Wharton
County secured approximately the same prices without the use of an an-
nual contract. It should be noted, however, that the individual purchases
in Wharton County approximated the quantities in which deliveries were
taken—under the annual contract in McLennan County.

In addition to purchasing the proper quantities, the best managed
counties also follow several other principles.

PURCHASING IN TEXAS COUNTIES 15

In these counties, officials responsible for purchasing study the needs
of the various departments and keep up with the quantities used in prior
periods. This practice assists in keeping the volume of purchases as low
as possible by purchasing only the amounts needed for a reasonable period
of time.

By keeping themselves informed regarding the trend of prices, officials
learn to recognize a reasonable bid, whether it be made verbally or in
writing.

Through the use of specifications describing the product desired, and
through the employment of commercial testing laboratories, officials know
that they are actually obtaining the quality necessary to meet the particu-
lar need.

The quantities received as a result of particular orders are carefully
verified before payment is made, thereby avoiding trouble and the possi-
bility of loss. »

Furthermore, the price at which the purchase is invoiced is compared
with the purchase order thereby eliminating the possibility of paying an
incorrect amount. In this connection, officials are careful to claim all
Federal tax exemptions to which the county is entitled, and they take ad-
vantage of all discounts allowed for prompt payment.

BULLETIN NO. 653, TEXAS AGRICULTURAL EXPERIMENT STATION

16
CONTENTS
Page
Introduction ............................................................................................................... .. 3
Sources of Information and Method of Handling .............................................. .. 3
Good Purchasing Procedures Defined .................................................................. .. 4
Purchasing in McLennan County, Texas .......................................................... .. 6
Purchasing in Other Texas C0unties—Kaufman, Anderson,
Milam, Grayson, Brazos, Dallas, Eastland, Harrison,
Liberty, Tarrant, Wharton, Waller, and Young ........................................ .. 8
Purchasing in Small Counties,“  Al a r12
Summary and Conclusions .................................................................................... ..l4

‘SBJIVO
‘3931100 I! I V
‘£87881’!

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