Addressing three must-haves for state procurement
By Bobby Feigler
With limited budgets but high demands for services, state, county and city governments are constantly challenged to serve citizen needs. Procurement officials have a tough job as they focus on transparency, time and cost savings, and supplier diversity in the purchasing process.
Advancements in technology are improving government processes across the board. How governments purchase goods is no different. Modern approaches to procurement, impacted by technology, can help government agencies address some of the most pressing challenges within local government departments.
Creating transparency in government purchasing
State and local government purchasing is often decentralized – everyone is a buyer. With more than 89,000 local governments across the country, many states contain thousands of local governments with their own purchasing powers. As a result, transparency is the most important factor for local governments, presenting an even greater challenge for procurement officials than cost savings. States are becoming more transparent with how they use taxpayer money, with all 50 states now providing at least some information on spending online.
Documentation outlining transactions helps maintain transparency within the organization and with taxpayers, and can eliminate issues should a contract be questioned. Whether purchases are made from suppliers with long-term relationships or new sellers, online documentation is an essential part of the procurement process.
Saving time and cutting costs
Unsurprisingly, budgets remain a primary concern. With sequestration’s effects trickling down into local governments’ budgets, departments have less to spend. It is important for governments to find savings however they can. One unique approach to purchasing is online reverse auctioning, where sellers drive down prices of goods, competing to provide government with the best value on the goods or services specified in their contract. We’ve found agencies save an average of 11 percent per transaction through reverse auctions.
Often when the budget is a concern, so is time, as employees are pressed to increase performance without the benefit of additional resources. Using online reverse auctions, procurement professionals only need to submit their requirements and return to select a supplier at the end of the bidding period, cutting the time spent on the transaction.
Local governments encounter unexpected challenges with timing when disasters strike and goods (like mattresses for emergency housing following Hurricane Katrina or fuel in areas impacted by Hurricane Sandy) become high-demand items. Government buyers need to secure these goods on short notice. Reverse auctions are one method of acquiring goods that are needed in a week or even a day, as procurement professionals can specify the delivery date.
Increasing utilization of local and diverse suppliers
Sourcing locally allows government to put resources back into the community, but it can often be time consuming for procurement professionals to search for local suppliers. Working with small and diverse businesses should be another government priority.
In our marketplace, a local school district in a struggling economic area was able to choose local vendors through reverse auctions, giving back to their community while saving on goods for the district’s students. Reverse auctions often allow purchasers to specify a type of supplier, whether it is a local company or a Veteran-owned business, so procurement professionals do not have to dedicate significant amounts of time to finding specific sellers.
Within our own marketplace, we’ve seen a 181 percent increase in awards made to small and diverse businesses over the past five years.
Use of technology by government and innovation in procurement helps improve purchasing through greater transparency, more efficient spending and increased use of local and diverse sellers. Reverse auctions are one way government is revolutionizing the way it does business and improving the way taxpayer funds are used.
Bobby Feigler is chief marketplace officer at FedBid.