L.A. Fails in Attempt to Cut Purchasing Costs

“How many city employees does it take to change a light bulb?

Thirty. One to screw it in and 29 to purchase it.”

--April 1995 ballot argument in favor of Charter Amendment 1, a purchasing reform measure.

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Four years after passage of a referendum that promised to reform the cumbersome Los Angeles purchasing system and save city taxpayers $35 million a year, savings have fallen far short.

The city spends $800 million annually buying goods and services, and will cut costs by only $1.8 million this year as a result of the ballot measure. The purchasing reforms are part of a larger program to overhaul the way the city does business.

A review shows the city effort is far from meeting goals in any of its cost-cutting initiatives:

* A plan to consolidate the 103 warehouses operated by 19 city departments into 66 facilities has fallen far short, with only six warehouses closed.

* Another key reform, creation of a computerized accounts payable system, won’t be in operation until September 2000.

* The Department of Water and Power, a key city agency, was allowed to opt out of the purchasing and warehousing programs. The Fire and Harbor departments, and the airport were also excluded.

* The charter amendment gave the City Council power to adopt, by ordinance, a series of cost-cutting measures. To date, the council has not acted.

“That’s mystifying to me,” said Deputy Controller Tim Lynch. Lynch doubts the city will ever save $35 million a year on purchasing, noting that projections attributed half the savings to the DWP.

City officials blame the delays in part on the need to negotiate almost every cost-saving element with powerful city employee unions, interdepartmental rivalry and an entrenched bureaucracy’s resistance to change.

“There is a lot of resistance,” said Councilman Joel Wachs, chairman of the council’s Government Efficiency Committee. “Nobody wants to give up power. Everybody wants to protect their turf and territory. Change isn’t easy.”

Still, Wachs and city managers in charge of the reform effort promise that the city is on the cusp of major change that will begin to reap big dividends in the next few years.

“It’s taking a lot longer than it should have to get it up and running, but it’s beginning to see results,” Wachs said. “It is going to save enormous amounts of money.”

Mayor Richard Riordan also is impatient for reform.

“He would have hoped all of this could have been done quicker and sooner and we could have redirected the savings,” said Steve Rubin, the mayor’s budget director.

Rubin said Riordan has been assured that the project is now on track. Additional savings in the millions of dollars will begin to accrue in the next year, promised Jon Mukri, an assistant general manager of the city General Services Department.

The current reform effort can be traced back to 1994.

The city hired the accounting firm of Deloitte and Touche, which estimated that Los Angeles could save $250 million over five years by reducing the city’s more than 100 warehouses, cutting the number of vendors and streamlining its purchasing system.

Auditors discovered that various city departments had 77 contracts for janitorial supplies, while an LAPD warehouse was holding a 22-year supply of small screw-cap jars and a Parks Department warehouse had 10,000 tapestry needles purchased in 1982.

“The city’s supply chain was fragmented among the numerous city departments, each of which was buying, warehousing and using supplies independently without regard to what other agencies were doing,” Mukri said.

Mukri said the audit’s savings projections were based on some unrealistic ideas, including a proposal to contract out all warehouse operations, Mukri said. The General Services Department later reduced from $250 million to $100 million the amount estimated it could save in the first five years by overhauling its business practices.

The auditors recommended “a single, citywide automated procurement, materials management and accounts payable function,” but, the city concluded in a report, the proposal was impractical.