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Procurement Perspectives: How waste is perceived in government procurement

0 53 Government

by Stephen Bauld

In general, many people feel that a strong argument can be made that the public's widespread perception of waste in public spending is exaggerated.
Procurement Perspectives: How waste is perceived in government procurement

Most often, allegations of wasted money relate to the question of whether government spending occupies far too large a portion of the total economy, or whether the administration of the day has made the correct policy choice in the expenditure. No doubt there can be considerable controversy in relation to each of these issues.

The disparity between actual wastage of public funds and the public perception of misuse arises from numerous causes.

The first is the tendency of the press to report the same specific instances over and over again. Most newspaper accounts on government waste contain two or three specific instances, but they are written in language that suggests hundreds of examples. Often what is perceived as waste of public money turns upon the value one places on particular programs.

For instance, in the United States, supporters of increased social or cultural spending complain about defence spending.

In contrast, opponents of government support for the arts are often inclined to criticize public subsidization of elite forms of entertainment, such as art galleries and the opera. The underlying reality is that government budgets generally represent a compromise between conflicting policy imperatives. In addition, many estimates are exaggerated on the basis of fallacious extrapolation deduced from selectively chosen data.

Even the meaning of "waste" is unclear. I would confine the term "waste" to describe expenditure that is clearly improper, such as expenditure for personal benefit; unauthorized misallocation of money approved for one purpose to some other purpose; and levels of expenditure that cannot be justified on objective criteria, even if one assumes that the policy decision to incur expenditures of that kind was correct.

To meet growing demands on municipal resources, many municipalities have cut back drastically on infrastructure maintenance and replacement. Such work is now carried out only when necessary, rather than when scheduled.

In an ideal situation, roads would not be resurfaced until sewers were replaced. However, if a watermain blows after resurfacing work, there is little option but to conduct the repair.

Across the continent, municipal councils have been elected to pursue the initial tax savings that result from deferring maintenance. The result is to incur higher longer-term costs. Construction-related activity is especially prone to this type of decision, due to the high costs involved.

As noted in one American newspaper article dealing with this situation: "Deferral of road maintenance will result in higher costs in the future. Pavement deteriorates 40 per cent in quality during the first three quarters of its expected useful life. During the next two to four years pavements deteriorate another 40 per cent. Deferral of maintenance can be significantly more expensive than preventive maintenance. Preventive maintenance that would have cost only one dollar in the early stages of the life cycle would cost four to five dollars as a result of the deferral."

Deferral of maintenance is a false economy, since the cost of effecting repair to a failed system is almost always vastly higher than the cost of routine maintenance — very often in the range of two to three times the cost that would have been incurred if the maintenance work had been carried out on a properly scheduled basis.

When deferral of maintenance and repair becomes a de facto part of the municipal financial planning process, it jeopardizes the municipality's considerable investment in its infrastructure. Most councils today would no doubt accept the proposition that deferral of maintenance is not a good long-term plan.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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