State to Leverage Purchasing Power
State to Leverage Purchasing Power
The State of New Jerseys Acting Governor Richard J. Codey put out a Request for Proposals (RFP) for a company that would help the state save money by purchasing goods and services more efficiently.
This next budget is a daunting challenge. We must seek ideas and advice wherever we can find them. One important place we can look is the business sectorto leaders who are experienced in meeting the bottom line, Acting Governor Codey says.
Three business leaders will work with the state treasurer and leaders in the legislature to analyze revenue projections, find ways to reduce spending, and help develop the next state budget.
Codeys RFP will be advertised by the Treasury.
We have to be on the lookout for savings, no matter how big or small. Codey says. Every dollar saved counts.
Under the RFP, New Jersey is looking for a consulting firm to help the state develop a strategic purchasing programa plan that will help New Jersey save money on virtually every type of good the state purchases, from computers to police cruisers to business cards, by leveraging the states buying power with that of hundreds of local entities.
Each year, New Jersey state government purchases about $1.9 billion worth of goods and services. The state would gain a better bargaining position by working together with the 1,700 local entities, including local governments, school boards, and fire departments that spend hundreds of millions more on purchases.
When the state needs to buy computers, for example, it would join forces with other entities that need the same type of equipment. By buying in bulk, the state and other entities could bargain for a better price.
New Jersey does not currently have a plan to leverage its buying power with those local bodies. When state government needs to buy an item, there is no central database that can tell how much of that item has been purchased statewide. As a result, state government and the local entities cannot unite their total buying power, and cannot negotiate for the lowest prices.
In the past few years, however, at least 10 states have begun to implement this type of initiative.
The State of Virginia predicts it will save $180 million for state and local governments over the next five years. Connecticut expects to save $3.75 million in fiscal 2005. Delaware expects savings will eventually represent 15 percent of all state purchasing. New Mexico is saving an average of 20 percent on purchases.
State Treasurer John E. McCormac notes that, while programs and procurement conditions vary from state to state, New Jersey could expect significant savings by implementing a similar program. The RFP will help New Jersey find a consulting firm that has developed such purchasing plans for other states.
This is a collaborative, buying-smart approach to purchasing that recognizes how strength in numbers and volume can influence bargaining power, Treasurer McCormac says. A key part of this contract is for the consultant to help New Jersey establish a state-of-the-art financial reporting system, which will capture buyer and vendor information statewide.
According to Acting Governor Codey, By not leveraging our own purchasing power, New Jersey is not being efficient or businesslike. And were probably paying too much. For that reason were looking for a consultant with experience in helping states implement new purchasing plansand help us realize savings.
Codeys budget advisory team includes: Philip D. Murphy, of Red Bank, a retired partner of The Goldman Sachs Group, Inc. and an international business leader for 20 years. Barbara M. Washington, of Cape May Courthouse, Vice President and Philanthropic Consultant of the Merrill Lynch Center for Philanthropy & Nonprofit Management. Ms. Washington helps nonprofit organizations with strategic planning, training, and advancement efforts. She previously served for several years in the New York State Office of the Comptroller. Thomas M. Jackson, of Morristown, with 20 years of legal and corporate budget management experience. As Executive Vice President of the GAB Robins Group of Companies, he helps manage the companys global budget and its financial strategic plan.