All 4 of the cities in the population group between 100,000 and 200,000 included in this survey report that they maintain city testing laboratories, although one states that its testing facilities are "very limited." Another reports that 2 separate laboratories are maintained by the city, 1 for testing of "coal and water treatment materials," and the other for the testing of "paving and sewer materials.” A third city in this group reports that its city laboratory makes tests of lime, alum, oils, gasoline, and all road materials (except road oils), also clay and concrete pipe." The fourth city reports that tests are made of "foodstuff, cloth, paper, et cetera" at its laboratory.

None of the cities of less than 100,000 population included in the survey reports the maintenance of a testing laboratory equipped to test all city purchases; most of those which do maintain their own laboratories report that these are "chemical laboratories only." Improvements in Purchasing Practices Shown in Recent Years.

This survey reveals that American municipalities, especially the larger cities, have made definite progress during recent years in improving their purchasing practices, and, consequently in effecting substantial savings to their taxpayers. We have already noted 13 the rapid growth of centralized purchasing in cities of over 30,000 population during recent years, and while the movement perhaps has not been so rapid in the smaller municipalities there nevertheless has been a decided trend in this direction. Along with the increase in centralized purchasing, and closely related to it, have come, among others, the following improvements in municipal buying practices and methods: The adoption of standards, thereby reducing the number of kinds, types, brands, and sizes of commodities; the use of specifications stating the precise grade and quality of the commodities to be purchased, thereby facilitating competitive bidding and simplifying the inspection of goods delivered; purchasing in large volume or on contract to obtain quantity prices; and bona fide competitive bidding. Many outstanding examples of savings that have been realized under each of these improvements in purchasing practices are included in the data collected in recent surveys. A few illustrations of each are listed below:

Adoption of standards.-New York City is now conducting a project which will reduce the number of printed forms used by city departments from 15,000 to 5,000 and the number of different sizes of such forms from 360 to 170. These changes will, it is estimated, save the city approximately $200,000 a year in printing costs.

Use of specifications.-The city of Milwaukee has reduced the cost of its soap purchases approximately 75 percent by formulating specifications instead of buying by brand or trade-name without knowledge of the ingredients of the product purchased.

Provision for bona fide bidding.-New York City reduced the cost of printing the city budget by $27,500 when it first asked competitive bids on this work. Milwaukee once received bids ranging from $172 to $600 for repairing a fountain with 4 pieces of granite of a particular size, shape, and color. Though outside the municipal field, a further classic example of possible savings through requiring competitive bidding should be mentioned here. This is the estimated saving of $2,000,000 which the State of Ohio effected last year through.

"P. 289, supra.

insistence upon bona fide competitive bidding, nearly $500,000 of which was saved on purchases of hot-mix road material alone.

Quantity buying.-The city of Milwaukee reportedly saves 7 or 8 cents a gallon on gasoline by providing storage facilities for several carloads and buying when the price is low.

Development in Cooperative Purchasing.

No review of the developments of recent years in municipal purchasing practices would be complete without some mention of at least a few major experiments in cooperative buying. The success with which some of these experiments have been carried out has prompted one authority to state that "one of the most encouraging trends in municipal purchasing is the growing appreciation of the possibilities of intermunicipal purchasing arrangements."14

In several cases school districts in the United States and Canada have cooperated in purchasing supplies and equipment. An outstanding example is the Kansas School Purchasing Association, which was established in 1930 and now includes over 500 schools, some of them in Nebraska and Oklahoma. This association secures special prices from vendors but sells to its members at the market prices. Then at the end of the year it declares a dividend to its members. This dividend amounted to 20 percent of sales in 1937.

Another interesting cooperative purchasing arrangement is that of Hamilton County, Ohio, the city of Cincinnati, the public library, the University of Cincinnati, and the city school district, all of which have established the "coordinating committee of the purchasing agents of Hamilton County." Joint contracts and informal agreements entered into during 1939 by this committee amounted to a total value of $575,000. In a single year (1937) the savings on coal purchases alone made under this cooperative arrangement were estimated at $50,000.15

A further important cooperative purchasing arrangement is the system which has been set up in seven States whereby cities or counties or both may purchase through the State agency. These States, in the order of the adoption of such plans, are: Michigan and New Hampshire (1919), Virginia (1924), Wisconsin (1929), West Virginia (1935), Pennsylvania (1937), and Alabama (1939). In every case purchasing through the State agency is optional with the local authorities. The usual arrangement is that the State central purchasing agency, in making its own contracts, provides that local governments may buy at the same price if they so desire; the State agency provides information on specifications and prices but assumes no further responsibility. Substantial savings are reported by most of the municipalities which have taken advantage of the purchasing facilities provided by these States.

A particularly significant development in this connection is the cooperative purchasing arrangements which have been worked out by several of the State leagues of municipalities. Among the leagues which have undertaken cooperative purchasing for their member municipalities are those in Arkansas, Colorado, Kentucky, Maine, Michigan, Missouri, Nebraska, North Carolina, Oregon, South

14 "Municipal Purchasing." by Joseph W. Nicholson, The Municipal Year Book, 1939, pp. 34-38, International City Managers' Association, Chicago, Ill., 1939.

15 "Cooperative Purchasing in the United States and Canada," by Carlton Chute, National Municipal Review, vol. 27, p. 501, October 1938.

Dakota, Wisconsin, and Virginia. Municipalities by "pooling" their orders in this way are reported in some instances to have purchased certain supplies at less than 50 percent of the prevailing market price. Need for Further Improvements in Purchasing Practices.

The facts which have been presented in this brief review of municipal purchasing practices would seem, on the whole, to show that at least the larger American municipalities are making rapid strides in the improvement of purchasing techniques and procedures. On the other hand, the survey has revealed that the situation in many quarters leaves much to be desired.

In the first place, a large number of even very large cities have not adopted centralized purchasing. In many of these it is still contended that such a system is not justified from the viewpoint of economy, that the cost of operating a purchasing department would be greater than the amount saved by centralized purchasing. While this contention may be sound as applied to municipalities in the smaller population groups, it would seem to be of extremely doubtful validity with reference to large cities. At any rate, the experiences of the cities which have practiced centralized purchasing for several years do not bear out the contention. It is interesting to note in this connection that the survey made by the National Association of Purchasing Agents and the International City Managers' Association in 1939 revealed that the average cost of operating the central purchasing departments of 75 cities of over 30,000 population in 1938 amounted to only about 1 percent of the value of purchases.16 Secondly, it is apparent from the reports received from some of the cities covered in this survey that their purchasing authorities either do not have full knowledge of the work that the Federal Government and certain national technical associations have done, and are doing, in establishing standard specifications, or that for some other reason they are not making adequate use of such specifications. For example, a member of the purchasing committee of a city of approximately 20,000 population reported that he had never heard of any such specifications but "would like to have copies * * * if we may be advised where to apply." Another city with a population of approximately 76,000 reported that such specifications "are on file, but no need for same at this time." Certainly the small municipality which seeks to prepare its own specifications should make use of, at least for reference purposes, the standard specifications already published by the larger units of Government and other agencies, especially those adopted and promulgated by the Federal Specifications Executive Committee, of which there are now more than 1300 in use. Many of these Federal Specifications may be easily adapted for municipal purchases, even if they cannot be used in their original form.

It would seem also, from results obtained from this survey, that many cities are not taking full advantage of laboratory facilities of tax-supported colleges or universities in testing commodities purchased to determine whether they comply with the quality and grade required by the contracts or specifications. Many municipalities situ

"The Municipal Year Book, 1940," p. 196, International City Managers' Association, Chicago, Ill., 1940.

ated near colleges or universities which now maintain adequate testing equipment are not making use of this available service. Moreover, even where publicly-supported educational institutions do not have such facilities at present it is entirely possible that a concerted request by municipal agencies for the service would result in its establishment, at least on a cost basis. Apparently, however, municipal officials, with a few notable exceptions, have done little or nothing as yet toward encouraging tax-supported colleges and universities to establish such testing laboratories.

As time goes on, American municipalities, regardless of size, in their search for ways and means of furnishing the public services which their citizens demand at the least possible cost to the taxpayers, will find it necessary to effect maximum economy in procuring the supplies, materials, equipment, and contractual services necessary to carry on the various municipal activities. Inasmuch as the expenditures for such commodities and services constitute nearly one-third of the expenditures for current operations of the average municipality, they demand the careful and constant attention of municipal officials throughout the country. Thus it is to be expected that more and more attention will be given to practices and procedures which promote economy in municipal purchasing. To enable municipal officials to evaluate properly the efficiency and economy with which the purchasing in their respective municipalities is now being handled, and to plan improvements in the present systems, it is necessary that they have comprehensive factual information as to those purchasing practices and procedures which have proved their value in actual operation. It is, therefore, hoped that many future detailed studies of actual purchasing methods and practices will follow.

CHAPTER VI

INDEPENDENT PURCHASING AGENCIES AND TESTING LABORATORIES, COMMODITY TESTING AND RATING AGENCIES

The importance of correct application of economic and engineering principles to purchasing is now being generally recognized.

The modern purchasing agent is an economist-and probably also an engineerwho studies his materials and products, their sources, methods, and costs of production, markets, and price trends.1

In addition to the efforts of the Federal Government, States, counties, and cities toward the adoption of scientific methods of procurement, private agencies are also much concerned with the improvement of their purchasing methods and procedures. Purchasing agents of private companies, educational, eleemosynary, and other institutions, with the help of their respective professional organizations, endeavor to introduce scientific methods in their purchasing. The description of the activities of some independent purchasing agencies will serve to illustrate the progress being made in this direction.

Many of the private companies or institutions do not have their own testing laboratories to ascertain that the materials and supplies they buy conform to their purchase specifications. Therefore, they are using for this purpose the facilities of private commercial laboratories. These laboratories afford an opportunity to the small manufacturer or retailer to find out the facts about the products he deals with which otherwise are only available to large concerns able to maintain their own testing laboratories.

The large department stores and mail-order houses have their own testing laboratories. These laboratories help the store buyer in his selection of merchandise by the testing of samples from different sources and ascertain that the quality of the merchandise delivered to the store is maintained.

The ultimate consumer can subscribe to the services of commodity and rating agencies, which provide simple, usable information about consumer commodities, covering quality, performance, and price.

The description of the activities of some testing laboratories and of the commodity testing and rating agencies will illustrate the facilities available to manufacturers, retailers, and consumers in determining and appraising the quality of consumer goods.

1 "Principles of Scientific Purchasing," by Norman F. Harriman, p. vii, McGraw-Hill Book Co., Inc., New York City, 1928.

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