STUDY OF SMALL PURCHASING FUNCTION IN THE OFFICE OF LOGISTICS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00988R000400010069-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 24
• Document Creation Date: December 9, 2016
• Document Release Date: August 29, 2001
• Sequence Number: 69
• Publication Date: July 30, 1975
• Content Type: MF

Approved For Release 2
MEMORANDUM FOR: Director of Logistics
FROM
SUBJECT Study of Small Purchasing Function in
the Office of Logistics
REFERENCE Memo dtd 2 May 75 to C/P~,PS/OL, C/PD/OL,
C/RECD/OL, and C/SD/OL fr D/L Subj:
Procurement Management Staff, OL, Staff
Study
1. Action Re uested: Paragraph 3 of this memorandum
contains six recommen ad ti ns for your approval.
2. Background: In accordance with the reference, the
small purc asing unction in the Office of Logistics has been
reviewed. To provide perspective for this review, the small
purchasing activities in three other Government agencies and
an industrial organization were visited and examined: Goddard
Space Flight Center (GSFC), Department of State, Defense Supply
Service - Washington (DSS-W), and Westinghouse Defense and
Electronics Systems Center. Discussion and background material
based on the review of OL components and the visits to the
external activities are contained in Attachment A.
3. Recommendations: It is recommended that:
a. All small purchasing activities in the Office of
Logistics be placed under the control of the Procurement
Division under a single manager who will be res o le
for managing the functions of the 25X1A
Staff, the General Purchase Branch, n e ma Pur-
chase Branch.
b. A simple reporting system be established which
will provide individual production, backlog, and through-
put data on a daily basis.
c. A production standard be established for each
Purchasing Officer and each organizational unit which
will be incorporated in LOI and MBO objectives.
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SUBJECT: Study of Small Purchasing Function in the
Office of Logistics
d. A formalized training program for small pur-
chasing be developed and implemented for each purchasing
agent which will include rotation of personnel among the
different purchasing sections.
e. A study and plan for phasing out be
f. The Safehouse Branch remain under the Real Estate
and Construction Division.
4. Attachment B contains a plan for implementing the
recommendations in paragraph 3.
Pro anagement Staff, OL
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STAFF STUDY
I. PROBLEM
To determine if the activities now conducted
in the General Purchase Branch, the
the Small Purchase Branch, and the a e ouse ranc can be
carried on more efficiently and effectively under a single
organizational unit.
II. ASSUMPTIONS
A. The volume of requisitions requiring small purchase
action will remain about the same.
B. Requirements for materiel will continue25X1A
to be received.
III. DISCUSSION
A. Productivity and Management
1. Mr. Sidney David, formerly in charge of the Navy
Department's small purchasing activity and a recognized
consultant, lecturer, and authority on small purchasing,
stated that the daily production standard for an expert
purchasing officer in the Navy was set at 15 "buy's" or
purchase orders per day. This standard was established
after careful study and observation of the purchasing
function; and the following circumstances applied: (1)
the purchasing officer was well qualified; (2) he had
practically no administrative or processing duties--all
he had to do was to locate the source and place the order;
(3) appropriate use was made of blanket purchase orders,
requirements contracts (indefinite delivery), and cash
funds; (4) each requisition listed only one line item.
In Mr. David's opinion, a daily production standard of
eight '?buy's" would be a reasonable goal for the pur-
chasing officer, such as ours, who has to devote some-
thing like 20 percent of his work day to such adminis-
trative functions as item clarification, customer liai-
son, follow-up, discrepancies, and vendor payment.
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2. From information obtained from supervisory
personnel at the four small purchase activities observed
outside of the Agency, average daily production per
buyer was indicated as follows: Westinghouse - 14,
GSFC - 8, DSS-W - 7, State - 4. The equivalent figure for
the Agency is 4.4.
3. Of these four, the situation at Westinghouse was
unique in that the great majority of the items purchased
were for standardized manufacturing programs and was posi-
tively identified by part number, specification or
drawing number, and source before reaching the buyer's
desk. This fact plus the fact that the Westinghouse
buyers alone appeared to have no significant adminis-
trative duties to cut into their buying time would
account for the high rate of buyer productivity there.
The duties of buyers in the other three activities
appeared to be more analogous to the Agency's situation.
See Exhibit I for situational characteristics in each
activity surveyed.
4. The significant ingredient observed which
seemed to account for GSFC's superior productivity was
?'management". The Procurement Operations Chief and
his Small Purchases Chief really managed their operation.
They stated that when they did nothing more than insti-
tute a daily production reporting procedure for each
buyer, individual output increased markedly and re-
mained at the higher level. Since that time, they have
instituted simple report farms designed to show indi-
vidual production as well as processing or "through-
put?' time (the time span from receipt of a requisition
to placement of the purchase order) and, especially,
to permit management to keep on top of and control the
small purchasing backlog. (See Exhibits II, III, and
IV.)
5. Their goal is to maintain a backlog of one week's
production which, they have found, seems to be about
right for inducing the desired level of productivity.
Personnel are shifted from or to the Expediting Section
as the backlog exceeds or falls below that level.
Individual and organizational productivity goals are
built in to their MBO program. Although the GSFC
buyers are relieved of follow-up work in general, it is
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unique with this organization that the buyers have to
type their own RFQ's and purchase orders. GSFC manage-
ment estimated that only 10 to 20 minutes per day were
needed to fill out the individual Daily Production Log
forms.
6. The other activities visited obviously lacked
positive management techniques of the GSFC people and,
in general, seemed to be reactive rather than antici-
patory. No formalized effort to keep track of individ-
ual productivity seemed to be made in these other
organizations, although they all were highly motivated
to provide service to their customers.
7. In the Agency, production standards for small
purchasing have not been developed and used. Of the
three Agency units involved, only GPB collects produc-
tion figures on an individual buyer basis; but this is
done weekly, incidental to the collection of data for
the Branch's weekly production report.
8. Use of daily and weekly production analysis
reports along the lines of Exhibits II, III, and IV
would provide the manager with the data he needs to
manage his backlog either through work distribution or
by shifting personnel from one section to another.
Establishment of individual and sectional production
goals would be in keeping with one of the basic fea-
tures of Management by Objectives. Moreover, units of
work used for measuring output should be uniform
throughout the reporting components. (See further
discussion on units of output under "Organization.")
B. Organization
1. Of the five activities surveyed, only the
Agency had the small purchasing function fragmented
in terms of location and responsibility. Examples:
a. The Mission and Function statements
for the and the Small
Purchase ranc o ci e a responsibility for
serving as a "quick-reaction procurement facil-
lty.
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b. SPB, and GPB all buy NNT and
materie
c. ~ and GPB, although both are in the
Procurement Division, are physically separated
and report independently to the Division Chief.
d. SPB reports to the Chief of the Central
Depot and is located in the Depot.
e. Assignment of requisitions requiring
procurement action is made by a unit of the
Supply Management Branch of the Supply Division
directly to the sub-divisional procurement units.
f. GPB reports production in terms of
requisitions completed and purchase orders placed;
but _ and SPB use only the completed requisi-
tion as the unit of production.
2. Under these conditions, management of the pur-
chasing workload, control of the backlog, optimal utili-
zation of personnel, and uniform career development and
training programs can not be efficiently effected. There
is no single point of responsibility for all small pur-
chasing requirements.
3. The designation of a single manager within the
purchasing organization is a prerequisite for backlog
management and personnel utilization. Not only could
a person knowledgeable in purchasing preclude the
majority of the misassignment of procurement actions
-which now occurs, but with daily production and back-
log reports such a person could direct the flow of
requisitions to or from those persons or units with
excess or overloaded capacity.
4. Admittedly, if one is looking at work accom-
plishment in terms of serving the customer, the number
of requisitions satisfied is the more pertinent sta-
tistic; but in terms of work output, the buyer's job
is to buy, and this is measured more accurately by the
number of buy's he or she makes in a given period.
Production statistics should be consistent throughout
the purchasing activity.
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C. Staffing and Training
1. With the exception of the Department of State,
where the Chief of Procurement stated that his five
buyers had been there "for years in the same jobs,'"
the Agency's grade structure for buyers in the small
purchasing activity was noticeably higher than that in
the other activities surveyed. See Average Grades and
Grade Ranges in Exhibit I.
2. The grades of Agency management personnel are
also considerably higher than in the other Government
activities. For instance, in DSS-W the Chief of the
Purchases Branch with its employees is a GS-13. 25X9
Under him are two GS-12 Section Chiefs, each of whom
supervises buyers. Typing support for this Branch
is provide y two GS-04 and one GS-03 clerk typists.
The Chief of the Procurement Branch in the Department
of State is a GS-14, while the Chief of his Purchasing
Section is a GS-13. The Chief of GSFC's small pur-
chasing section is thought to be a GS-12.
3. The fact that at GSFC and DSS-W only the
Section Chiefs can sign purchase orders may be related
to the lower grade structures at those locations. How-
ever, if anything, this situation would tend to re-
strict productivity; and yet production per buyer is
relatively high there.
4. Of the five activities, Westinghouse alone
had specific educational rec{uirements for buyers:
1 year of college level studies for Jr.'s; 3 years
for assistant's; and a degree for Buyers.
5. In the matter of training, all activities
divided the learning cycle into two phases: purchas-
ing up to $5,000 per transaction and purchasing from
$5,000 to $10,000 per transaction. The dividing line
occurs because of the clauses and documentation re-
quired for purchases over $5,000.
6. Assuming a GS-07 level employee of average
ability with no previous buying experience, Mr. David
estimated that such a new buyer could be carrying his
weight in the first phase by the end of 3 months if
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he were motivated and if his supervisor were a
conscientious instructor with a plan for training.
An additional 3 months would be required to reach
proficiency at the $10,000 level.
7. With the exception of Westinghouse which, of
course, is not governed by ASPR's or FPR's, the inter-
viewee's generally concurred with this schedule except
that some considered an overall span of 9 months to
be more realistic than the b months suggested by
Mr. David.
8. In the Office of Logistics, only GPB had a
formalized, systematic training program for new pur-
chasing personnel. Depending on workload and other
factors, it was estimated that 6 to 9 months would
on the average be required for completing the training
outlined.
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A. The presently fragmented small purchases organization
does not permit the centralized management control needed to
maximize productivity through backlog management and optimal
utilization of manpower.
B. The present practice of having the Supply Management
Branch, SD, assign the action responsibility for requisitions
requiring small purchases directly to individual branches or
staffs is not logical from a management standpoint and results
in a significant amount of non-productive time and effort.
C. Considering the experience and grades of the personnel.
engaged in the Agency's small purchase program, average pro-
ductivity per buyer is too low. Allowing for fallow-up and
other administrative duties, an average of 6.5 buy's per day
per buyer is considered to be a reasonable standard.
D. With an average output of 6.5 buy's per buyer per
day, the entire small purchasing job could be done with 6
fewer purchasing agents and probably with fewer management
and support personnel.
E. An across-the-board, formalized training and develop-
ment program for purchasing agents would promote individual
growth and assist the Manager of Purchasing by providing uni-
formly trained personnel who could be shifted as necessary to
respond to workload reQuirements.
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1. To provide the proper environment for a smooth
transition of the unit and functional transfers recommended
in this study, it is proposed that the following implementa-
tion schedule be followed:
a. Transfer control of SPB/CD/SD from the Supply
Division to GPB/PD. This in effect will place the
responsibility for all small purchase activities in the
Office of Logistics under the control of Procurement
Division. At the same time, move from its present 25X1A
organizational niche to the contro o GPB/PD. Concur-
rently with these two organizational moves, designate
a single manager to oversee and control this now com-
pletely centralized function. It is recommended the
single manager be whoever fills the position of Chief,
GPB/PD.
b. Upon completion of the steps outlined in a
above, transfer the responsibility for determining the
procurement action unit from Supply Management Branch,
SD, to General Procurement Branch, PD. The timing and
methodology for a smooth transition of the responsibility
should-be left up to the Chiefs of the units.
c. Implement the previously identified daily re-
porting system for individual buyers, with the reports
flowing through the immediate supervisors to the newly
designated single manager.
d. Institute a comprehensive, vigorously adminis-
tered backlog management program.
e. Draw up a comprehensive training plan for all
new buyers with the ultimate objective of preparing
them for performance in any of the small purchases units.
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2. Whether or not the recommendation to merge all of the
small purchasing units under a single manager is approved and
implemented, the several management controls recommended are
important enough to be considered seriously for implementation
regardless of the organizational structure. Closer control
of the work flow, day-to-day management of the backlog, and
increased individual production are essential if any improve-
ments in performance are to be realized.
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CHAR~:CTERISTICS OF FIVE ShsA! L PURCHASE ACTIVITIES
Westin house
GSFC
DSS-W
A enc
State
Comments
Approx. Annual Vol.
104,000
18,b00
34,000
18,600
6,000
Buy's
~~o. of Buyers
30
10
19
17
6
Mgr. not included
Av. Buy's/buyer/Day
~ 14
8
7
4.4
4
Approximate
-.~~ough-put (days)
14
20
20
23
15
Estimated
Tire Available to Buy
95%
80%
90%
75%
90%
Estimated
Grade Range of Buyers
(GS 05-12)
GS 04-07
GS O4-11
GS 07-13
GS 06-11
Westinghouse $
equivalents
Av, Grade of Buyers
Single Item Req'n.
Req`n. Pre-buyer Pro-
cessed
Fo11oz~~-up by Buyers
~Irt ,;a rate Expedite Sec-
~. Lion
No
Yes
Occasional
Yes
GS 06
No
~ No
Occasional
Yes
GS 07
No
No
Occasional
Yes
GS 10
No
Yes
Yes
Yes2
GS 111
No
No
Yes
No
Buying Done By Phone
Faotnates
Yes
Yes
Yes
Yes
Yes
To extent possible
'One trainee is GS-06; buyers are GS-11.
2CCDB faila.~ls-up oniy to point where contact is required with vendors.
Buyers take over from that point.
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Bu;~ers Comr~odity-
or?i ented
',0.'s Typed by Buyers
Daily Produceion Report
for Each Buyer
"y's From BPA's
Aver