THE MISSISSIPPI LEGISLATURE

Introduction

Legislators and state agency personnel have often expressed concerns that agencies and governing authorities may not actually pay the lowest possible prices for commodities purchased through competitively bid state contracts. Some individuals contend that commodity items could be purchased at retail ("shelf") prices lower than state contract prices.

Overview

For the thirty-four commodity items compared by PEER, the Department of Finance and Administration's state contracts resulted in prices lower than retail "shelf" prices. For the items compared by PEER, state contract prices were lower than retail prices for 93% of the pricing comparisons (758 of 816). Factors which give DFA's state contract prices an advantage over retail prices include:

• greater "market buying power" of the state through assurance of multiple purchasers;
• direct contracts with product manufacturers, thus reducing or eliminating wholesaler costs;
• contracts with specifications which require the item prices to include all freight, installation, transportation, or warranty costs; and,
• purchasing in bulk quantities (e.g., by the dozen, case, or thousand).

The commodity purchase provisions of MISS. CODE ANN. Section 31-7-12 (1972) differ for agencies and governing authorities, as defined in CODE Sections 31-7-1 (1972). While state agencies must purchase supplies and equipment at the contract price set by the Department of Finance and Administration's exclusive competitively bid contracts, state-funded local entities such as counties and school districts have greater flexibility. They may purchase either through the state contract or from local businesses under specified conditions. As a result, all Mississippi governmental organizations do not have the same degree of flexibility to obtain the lowest available price when purchasing commodities.

Recommendation

Using the experience and resident expertise of its staff, the Department of Finance and Administration should submit a written report to the Governor and the Joint Legislative Budget Committee no later than December 1, 1995, addressing whether the Legislature should amend MISS. CODE ANN. Section 31-7-12 (1972) to eliminate differences in purchasing requirements for state agencies and governing authorities.

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