The Wellesley Housing Authority did not properly administer the procurement of $113,206 of appliances and water heaters.

Audit found WHA did not use a competitive process for the purchase of ranges, refrigerators, and water heaters.

Overview

During the audit period, the Wellesley Housing Authority purchased refrigerators, ranges, and water heaters totaling $113,206 without using a competitive procurement process. As a result, it may have spent more than necessary for these items.

The Authority budgeted and spent the following amounts for these items from January 1, 2014 through December 31, 2016.

	'14 Budgeted	'14 Spent	'15 Budgeted	'15 Spent	'16 Budgeted	'16 Spent	Total Budgeted	Total Spent
Refrigerators	$9,000	$25,000	$10,000	$12,024	$10,000	$10,227	$29,000	$47,251
Ranges	6,000	9,698	6,000	9,779	6,000	8,993	18,000	28,470
Water Heaters	20,000	31,213	20,000	6,272	20,000	0	60,000	37,485
Total	$35,000	$65,911	$36,000	$28,075	$36,000	$19,220	$107,000	$113,206

 

Even though the budgeted amounts shown above indicate that the Authority anticipated spending a substantial amount annually to purchase appliances and water heaters, it routinely used two local vendors to procure them noncompetitively.

Authoritative Guidance

Effective November 7, 2016,² Section 4(a) of Chapter 30B of the Massachusetts General Laws, which applies to local government agencies such as housing authorities, states,

For the procurement of a supply or service in the amount of $10,000 or greater, but less than $50,000, a procurement officer shall seek written quotations from no fewer than 3 persons customarily providing the supply or service.

Section 4(c) of Chapter 30B of the General Laws, which applies to local government agencies such as housing authorities, states, “A procurement in the amount of less than $10,000 shall be obtained through the exercise of sound business practices.” The term “sound business practices” is defined in Section 2 of Chapter 30B as “ensuring the receipt of favorable prices by periodically soliciting price lists or quotes.”

Since the Authority, through its budget process, anticipated purchasing refrigerators, ranges, and water heaters in amounts that would have fallen within the purchasing ranges in Chapter 30B, it could have availed itself of the competitive processes established within the statute.

Reasons for Noncompliance

The Authority had not updated its formal written procurement policies and procedures, which require it to use competitive procurement, as far as possible, when purchasing goods and services.

Recommendation

The Authority should update its formal written procurement policies and procedures, which require it to use competitive procurement, as far as possible, for goods and services, and should ensure that these policies and procedures are adhered to.

Auditee’s Response

We respectfully disagree with this finding for a couple of reasons. In January of 2016, [the] Facilities and Modernization Director . . . undertook an exercise to obtain quotes from various vendors for refrigerator purchases. He successfully obtained quotes from Sears ($529.99 per unit), Frigidaire ($579.00 per unit) and Jarvis Appliances ($478.00 per unit). The quote offered by Jarvis Appliance was the lowest we obtained. Jarvis is a local appliance dealer and the Housing Authority has done business with them for some time now due to their low prices and very good customer service. Additionally, we are not certain on a year to year basis how many refrigerators, stoves, or water heaters we require as it varies considerably. WHA does not have adequate storage space to carry out a bulk order. We need to do these orders on an as needed basis. With respect to water heaters, these get replaced usually on an emergency basis. It simply is not practical to perform procurement in emergency situations; and indeed public entities are allowed to respond to emergency situations to safeguard resident or public safety or well being without adherence to the procurement policy.

The Wellesley Housing Authority already has a “formal, written procurement policy” that is followed.

Auditor's Reply

With its written response to this draft report, the Authority did provide a list of quotes it said it had solicited and received for refrigerators as of January 2016. However, it did not provide any documentation of quotes for appliances and/or water heaters it may have obtained before January 2016 and therefore could not substantiate that it had used a competitive procurement process for all the refrigerators, ranges, and water heaters it purchased during our audit period.

Although the Authority asserts that it is not certain from year to year how many refrigerators, stoves, or water heaters it will require, as noted above, it prepares an annual budget that identifies a specific amount of money it has for purchasing these items. In its budgets during our audit period, the Authority anticipated significant appliance and water heater expenses during each fiscal year. The Authority exceeded its budgeted estimates for appliances every year and for water heaters one year. From the proposed budgets, the Authority had a reasonable estimate of items that might be purchased each year; thus it could have obtained quotes to ensure that it received the most economical price. It could have obtained quotes for items as needed, removing the need to store any items or purchase on an emergency basis.

The Authority does have a procurement policy, but it has not been updated to address changes in the Commonwealth’s procurement laws.

2. Section 4(a) was amended during our audit period. For the period July 1, 2013 through July 1, 2014, the range in the law was not $10,000–$50,000 but rather $10,000–$25,000. For the period July 1, 2014 through November 7, 2016, the range was not $10,000–$50,000, but rather $10,000–$35,000.

Date published:	May 30, 2018