the functional areas in a public sector organization. At a time when great public attention is devoted to the escalating cost of care in non-profit hospitals, the increasing difficulties involved in the funding of publicly-supported education, and a host of other cost related concerns in the delivery of public sector services, the major components of increasing costs in these activities and in all other public-sector organizations are personnel costs and material/equipment costs.
In part, the twin problems of improved personnel efficiency, and more efficient purchasing and contracting in the public sector can be effectively attacked through efforts on the part of public-sector management to improve the efficiency and the effectiveness of the purchasing and contracting function in their organizations. Purchasing and contracting efficiency may even be used as a means of optimizing personnel costs, in those instances where the contracting out of services is both possible and efficient.
The Role of Purchasing and Contracting in Organizations
Major organizations, whether in the public or in the private sector, exercise financial control over their activities through the process of budgeting. Critical to effective budget management is the control of expenditures and the efficient use of available financial resources. The activities of the organizational purchasing and contracting function are directly related to each of these aspects of effective budget management. Peter Drucker noted that a budget, and, thus, those activities involved in effective budget management is, "above all, a managerial tool." Thus, it can be reasonably inferred that the purchasing/contracting-related activities of an organization are legitimate concerns of organizational management.
It therefore, follows that the productivity of the organizational purchasing and contracting function and (particularly in public-sector organizations) the adheren...