Vermont is using some creative thinking to handle its budget issues. Pensions (as you all know) are becoming one of the biggest burdens on State budgets. Legislatures are either cutting existing pensions (which is likely not legal) or creating multi-tiered pension systems where newcomer’s pension benefits are significantly reduced (This will have the effect of driving new people away from government). State employees we’ve talked to (and the unions that represent them) feel both undervalued and infuriated by these moves.
We recently ran across this article from stateline.org which describes how Vermont sat down with their unions to jointly resolve part of their budget crisis. A little outside the box thinking went a long way. Kudos to Vermont for thinking creatively and turning a potentially adversarial situation into a win for both parties.
Are you applying creative solutions to your problems?
We’ve seen a trend lately of potential clients requesting we devote staff full time to projects. This seems particularly true of our IV&V and QA projects. We think the reasoning is probably based on at least three factors. Clients:
- Are tired of consultant bait and switch strategies where superior resources are bid (and may even start) on the project but less experienced staff show up and do the bulk of the work;
- Want rapid access to known consulting resources for projects; and
- Want to make sure there’s continuity on project issues and tasks provided by the consultant.
There are however downsides to having consultants devoted exclusively to your project. Consultants:
- Become myopic over time and miss critical issues and solutions a fresh pair of eyes might catch;
- Are costly resources that should only be on board when they are needed, when they’re not fully utilized (and there are always those down times on projects) you don’t want to pay for them;
- Stop bringing in new ideas and experience gleaned from other projects that might be just what you need to thrive; and
- Become viewed as staff and their unique experience and voice is no long heard.
Of course we’re not suggesting the elimination of consistent consulting staff on your projects. You do need continuity and responsiveness. And we are also not suggesting consultants should be swapped out regularly. Just be aware there are hidden costs to demanding consultants be devoted full time to your project (particularly on longer projects) and benefits to having “fresh legs” in the marathon that projects can be.
Should budget shortfalls mean you cancel that project you’ve been planning? Counter intuitively (and with a few conditions) we say no. In our experience lack of funds actually leads to more successful projects. Without money you:
Focus on simplicity – you’re not likely to look for the “Cadillac” solution, you can’t afford it. Simple solutions tend to be easier to implement.
Encourage staff participation – you won’t be able to afford, nor will you need, an army of consultants to implement your simple solution. Your staff will have to take on added project responsibility to get things done. There’s nothing like having skin in the game to make your staff fight for success.
Use the wisdom of your own people – you can’t buy your way out of the problem so your approach likely has to be home grown. You’ll be relying on the creativity that exists within your organization to complete this project. When solutions are home grown they are easier to sell internally and generally a better fit for your needs.
Better utilize the funds that do exist – when resources are scarce you pay greater attention to them. You are forced to track every dollar spent on the project which in turn means you are likely to spend your money where it will do the most good.
Of course lack of funds will limit the kinds/size of projects you take on. You’re not likely to re-engineer your entire Medicaid system. But…what about rewriting those out-of-date procedures manuals? How about revisiting your policies? What if you could re-engineer a few of those inefficient processes? Lack of funding, while not ideal, is the reality we all now face. It shouldn’t stop your projects and can even help them to be successful.
Last night’s New Hour show on PBS had an excellent segment on the budget issues facing a diverse range of states. This is worth the 10 minutes it will take to view: http://www.pbs.org/newshour/bb/business/jan-june10/budgets_01-12.html.
The video shows a few things: States ended up with budget shortfalls from similar causes and solutions involve draconian cuts to services.
Purchased goods and services account for over 50% of any State’s budget yet the management and provision of procurement services doesn’t get the priority or attention it deserves in public sector agencies. Procurement and supply chain management in private sector are given considerable weight because even a modest reduction in the costs of procurement itself or of procured goods and services can mean millions in savings. The same is true for government agencies. Making procurement more efficient and effective is a necessary tactic in dealing with current fiscal budget shortfalls and part of public sectors responsibility to be good stewards of public monies. As part of a recent engagement to re-engineer the procurement practices of a state procurement office, Public Knowledge examined best practices in procurement from national procurement organizations and States. We thought a summary of these best practices might be beneficial to you. Current best practices in procurement fall into five areas and include:
Professionalism. Cutting-edge public procurement agencies are raising the level of professionalism among their staff and supervisors through training, certification and the adoption of clearly defined standards.
Innovation. Progressive procurement agencies look for ways to improve their processes and to be more effective and efficient. Some best practices include:
- In the area of IT purchasing:
- Writing solicitations that describe a problem and ask for a solution, which allows suppliers to propose innovative ideas that could provide better value to the state.
- Making purchasing decisions based on overall value rather than price alone (best value).
- Forming long-term strategic partnerships with qualified suppliers.
- Sharing risks and benefits with suppliers.
- Creating a pool of qualified suppliers.
- Focusing on sustainable/green procurement.
- Directing state resources to strategic sourcing and cooperative purchasing to gain volume pricing from suppliers.
- Making use of reverse auctions, purchasing cards and multiple award contracts.
E-procurement. Successful procurement entities use electronic systems to run the procurement process from solicitation development to contract administration. The optimal systems include the following features:
- Supplier management, electronic notification of bids, reverse auctions and electronic catalogs.
- A system linked to government accounting systems with automated electronic invoicing, evaluated receipt settlement and accounts payable processes.
- Online supplier registration, electronic posting and distribution of solicitations, e-mail notification of solicitations, electronic bidding, posting of tabulations and awards, online auctions, and electronic purchase orders.
Productivity. Well-regarded procurement agencies have tools and policies designed to increase productivity and decrease strain on existing resources. Some of those tools are listed below.
- Web page with a “how to do business” guide.
- Formally established ethics policy with enforcement and training.
- End-user and supplier outreach and education.
- Master contracts to permit rapid low cost acquisition.
- Performance measures.
- Procurement manual that has been published or revised recently.
- Internal and external customer service and supplier surveys.
Leadership. Best practices indicate a preference for a center-led organizational structure, defined as: The central procurement authority focuses on training and education, performance measurement, dispute resolution, system oversight and supply-chain management. Agencies are empowered to conduct procurements over which they are subject matter experts while the central authority consults, provides support, and reviews compliance with state rules and policies.
