New Study Analyzes Use of Procurement Software
About 22 percent of city, county and state governments do not use procurement software of any kind. At the other extreme, some statewide software systems are used by all levels of government within the state. A survey conducted this summer sought to characterize the various levels of procurement software adoption, to show which particular software features are being used and, most importantly, to what benefit. This article will summarize some of the survey’s findings.
The survey was conducted and funded by NIGP: The Institute for Public Procurement in partnership with SciQuest, a provider of on-demand supplier management and e-procurement solutions; and Deltek, whose information solutions provide market intelligence, analysis, events and training. Researchers are Dr. Cliff McCue of Florida Atlantic University’s Public Procurement Research Center; Eric Zoetmulder, director of product marketing, SciQuest; Tina M. Borger, NIGP research director; Tim Brent, senior manager, state and local information services, Deltek; and Chris Dixon, manager, state and local industry analysis, Deltek.
Users of procurement software who responded to the survey rate better spend visibility, improved audit trail, better procurement transparency and lower processing costs among the most important procurement software benefits. Table I reports various e-procurement benefits and how respondents rated their importance.
Of respondents that use procurement software, some 35 percent report they are planning to implement new or additional procurement software. About 26 percent of those who do not now use procurement software are planning to implement it.
Figure 1 (page 14) highlights reasons that have prevented implementation of a procurement software system, including perceptions that a system isn’t needed (20 percent), isn’t affordable (20 percent), or hasn’t been approved by top decision-makers.
Almost half of survey respondents (45 percent) do not use state-furnished systems for any of several listed procurement functions. Of those that do, 11 percent use a state system for notifications, 9 percent for e-sourcing (formal invitation for bid [IFB]/request for proposal [RFP]); 7 percent for e-sourcing (informal request for quote [RFQ]) and 6 percent for e-catalog. Other than a state-furnished system, 63 percent of respondents report that their entity/agency uses another procurement software and 37 percent respond that they do not.
Of entities that use procurement software, about 13 years is the average timespan they have been using it. The largest segment of respondents (34 percent) have been using it more than 15 years, perhaps pointing to an opportunity for software suppliers to provide updated systems.
|Table I: Ratings of Procurement Software Benefits|
|Expected Benefit||Level of Importance||Total # Responding|
|Very Important||Somewhat important||Not important||Not sure/
|Better spend visibility||62.9||19.6||1.0||16.5||97|
|Increased contract compliance||57.1||23.5||4.1||15.3||98|
|Increased spend under management||43.3||30.9||8.2||17.5||97|
|Improved audit trail||61.2||22.4||1.0||15.3||98|
|Lower processing costs||58.8||20.6||4.1||16.5||97|
|Increased procurement transparency||61.5||21.9||0.0||16.7||96|
|All figures represent % of total responding unless otherwise indicated.|
Table II breaks out how various capabilities are provided in current software configurations.
|Table II: Summary of Current Configurations Of E-Procurement Software|
|Type of capability||Method of Acquisition||Total # Responding|
|Built In-House||COTS Software (Installed)||COTS Software (Cloud-Based/ SaaS)||Part of Core ERP/ Financial Solution||N/A|
|Requisitioning (incl. Catalog services/shopping cart)||9.9||11.0||2.2||61.0||15.9||182|
|Online supplier registration||25.0||13.6||11.9||14.2||35.2||176|
|Central contract repository||27.2||12.7||3.5||25.4||31.2||173|
|Procurement marketplace (including catalog services)||5.8||12.8||5.8||11.0||64.5||172|
|Supplier performance and risk management tools||10.7||5.9||2.4||10.7||70.4||169|
|Contract life-cycle management suite||9.5||7.7||1.8||11.3||69.6||168|
|All Figures represent % of total responding unless otherwise indicated|
Table III shows adoption levels of various software capabilities by respondents’ entity type.
|Table III. Adoption of Software Capabilities by Entity Type|
|Type of capability||Acquiring Entity (% of Respondents)||% of All Respondents|
|City/ Municipal Govt. (37%)||County/ Regional Govt. (18%)||State/ Provincial Govt. (15%)||Public College/ University (11%)||Special District/ Authority (9%)||Public School District (8%)|
|Requisitioning (incl. Catalog services/ shopping cart)||58||42||11||14||13||14||58|
|Central contract repository||45||26||11||10||16||11||41|
|Online supplier registration||41||27||10||10||13||12||39|
|Procurement marketplace (including catalog services)||23||10||8||7||3||10||21|
|Auctions (Reverse & Forward||18||10||3||3||0||3||13|
|Supplier performance and risk management tools||20||9||4||5||6||6||18|
|Contract life-cycle management suite||17||13||2||5||6||8||18|
|All figures represent % of total responding within each category unless otherwise indicated|
Of survey respondents who use procurement software’s requisitioning capability (including catalog services and shopping cart), 69 percent report either being satisfied or very satisfied. Likewise, respondents who use online supplier registration are mostly either satisfied (29.5 percent) or very satisfied (21.7) percent. Notably, however, 35 percent of respondents do not use online supplier registration. Large percentages of respondents do not use other listed capabilities, such as reverse auctions, e-invoicing, supplier performance and risk management tools, etc. Of those that do use the various capabilities, more report satisfaction than dissatisfaction.
Respondents who use procurement software systems report realization of benefits such as better prices, better spend visibility, and increased contract compliance. Some 24.8 percent of respondents report a better-than-expected improvement in audit trails and another 19.3 report better-than-expected processing cost decreases.
When it comes to buying green products, only 11 percent of respondents say their electronic catalog requisition functionality highlights green items. Another 3 percent report the e-catalog allows green items only for certain products.
About the survey respondents
The on-line survey was conducted using SurveyMonkey.com, with email invitations sent to a targeted group, which was heads of procurement at all levels of government throughout the United States and Canada. Of 2,269 total recipients, 499 (22 percent) responded after an initial email and a reminder email.
Geography.Respondents are geographically dispersed, with 132 coming from the Southeast United States, 78 from Southwestern states as the largest concentrations out of 489 respondents to a question about geographic location. The state with the most respondents was Florida with 63, followed by California with 30, and Colorado and South Carolina with 20 each.
Type of entity.The largest percentage or respondents (37 percent) work for city/municipal government, with 18 percent working for county/regional government; 15 percent for state/provincial government; and 11 percent for a public college or university. Other respondents included 9 percent working for a special district/authority (such as an airport or transit authority); 8 percent for a public school district; 1 percent for a federal agency and 1 percent for a township/town/village government.
Job title.Some 41 percent of respondents are chief procurement officers or purchasing directors, with 32 percent who are purchasing manager and 12 percent who are purchasing agents. Another 7 percent are buyer/contracting specialists, and 8 percent did not specify.
Organizational structure.Thirty-six percent of respondents described their organizational structure as “centralized with delegated authority,” and another 29 percent described their structure as “centralized contracting/decentralized buying (from established contracts).” Of the rest, 22 percent described their structure as “decentralized with central review,” and 13 percent described their organization as “decentralized.”
Procurement function.A vast majority of respondents (80 percent) report that they work for the centralized procurement function and another 15 percent work for a unit of the organization with delegated authority.
Number of employees. More than half of respondents have 1 to 5 full-time equivalent employees (FTEs) in their procurement office – 30 percent have 1 to 2.5 FTEs, and 30 percent have 2.51 to 5.0 FTEs. Another 11 percent have 5.01 to 7.55 FTEs and 11 percent more have 7.51 to 10.0 FTEs. Eight percent have 10.01 to 15 FTEs; and 9 percent have more than 15.0 FTEs.
Number of active contracts.Some 39 percent of respondents either do not track information about the number of active contracts (24 percent) or don’t know the number (15 percent). Those that do know include 23 percent with less than 100 active contracts, 16 percent with 100 to 250 active contracts, and 13 percent with 250 to 500 active contracts. Only 2 percent have more than 1,500 active contracts.
Number of informal written (including email, fax and online) requests for quotes.More than half of respondents (63 percent) do not track or do not know how many RFQs they issue per year. Of those that reported, most fell into the range of less than 100 RFQs (13 percent) or 100 to 250 RFQs (12 percent). In all, the survey reports 456,038 written RFQs.
Number of formal competitive solicitations.Twenty percent of respondents report less than 25 formal competitive solicitations issued per year, and another 20 percent report 25 to 50. Of the remainder, 14 percent report 50 to 100; 16 percent report 100 to 150; and 23 percent either do not track the information (15 percent) or don’t know (8 percent). The total number of formal competitive solicitations reported is 51,690.
Invoices processed.The vast majority of respondents either do not track (25 percent) or don’t know (61 percent) how many invoices they process per year.