Reduce Costs by Improving Procurements

Procurement and supply chain management are given considerable weight in the private sector because even a modest reduction in the costs can result in millions in savings. Purchased goods and services in government agencies account for more than 50% of any state’s budget, but procurement services typically do not get the attention they deserve.

Making procurements more efficient and effective can help your agency be a responsible steward of public funds and help you fulfill your agency’s mission despite budget shortfalls.

Ways to Strengthen Your Process

As part of a recent engagement to re-engineer the procurement practices of a state procurement office, we researched best practices from national procurement organizations and states. Here are key takeaways that you can use to strengthen your processes:

Strong procurement organizations develop their staff. 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 is critical. Progressive procurement agencies look for ways to improve their processes and to be more effective and efficient. The IT purchasing innovations we identified include:

  • Write solicitations that describe a problem and ask for a solution. This allows suppliers to propose innovative ideas that could provide better value to the state.
  • Make purchasing decisions based on overall value rather than price alone.
  • Form long-term strategic partnerships with qualified suppliers.
  • Share risks and benefits with suppliers.
  • Create a pool of qualified suppliers and master contracts.
  • Focus on sustainable and green procurement.
  • Direct state resources to strategic sourcing and cooperative purchasing agreements to gain volume pricing from suppliers.
  • Use reverse auctions, purchasing cards, and multiple award contracts.

E-procurement systems that help you manage the process from solicitation development to contract administration contribute to success. The best systems include the following features:

  • Supplier management, reverse auctions, and electronic catalogs
  • A link 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

Use tools that enhance your agency’s productivity. Well regarded procurement agencies have tools and policies designed to increase productivity and decrease the strain on resources. Some of these tools include:

  • A web page with a how to do business guide
  • A 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
  • An up-to-date procurement manual
  • Internal and external customer service and supplier surveys

Leadership plays a vital role. Best practices indicate a preference for a center-led organizational structure. This means the central procurement authority focuses on training and education, performance measurement, dispute resolution, system oversight, and supply-chain management. And 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.