Protecting taxpayer dollars through advancements in procurement practices: three strategies to make purchasing work for you
By Susan Combs
In Texas, my office manages procurement for many state agencies, facilitating more than $1 billion worth of spending power on pre-negotiated and pre-approved contracts for more than one million products. To ensure the most bang for the taxpayer’s buck, we’ve adapted a number of effective strategies to control costs and streamline operations. And we’ve seen tangible results that offer lessons for smarter government procurement at all levels.
Take a hard look at the numbers
In Texas, we created a Strategic Sourcing initiative, which acts as the research and development arm of our state purchasing department. The group studies thousands of items to ensure the right product and quality pricing is secured for more than 200 state agencies and universities and more than 2,000 local government members of our Texas Procurement and Support Services (TPASS) Division’s CO-OP.
For example, one of our biggest challenges has been mainstreaming our procurement efforts for materials to maintain our roads, known as road aggregate. In analyzing these contracts, Strategic Sourcing helped us reduce the amount of open-market solicitations from hundreds to four requests for proposals a year.
We also met with vendors to eliminate out-of-use specifications and consolidate similar specifications. The result was a reduction in the bids for materials from nearly 200 unique specifications to just more than 90.
Since 2009, these changes have greatly improved efficiency in the bidding and evaluation process, and more importantly, helped us realize $54 million in savings in road aggregate bids.
Leverage buying power and technology
Our Strategic Sourcing initiative has helped us realize more than $123 million in cost savings and rebates to state government and purchasing CO-OP members since 2009.
At almost $1 billion in annual volume, the State of Texas Charge Card Program is the largest state contract of its kind in the nation. Leveraging the state’s considerable volume, Strategic Sourcing conducted multiple rounds of negotiations to successfully increase the percentage of charge card expenditures rebated to state and local governments and other CO-OP members. Since the current charge card contract went into effect in February 2011, state and CO-OP users have generated $5.27 million in rebates through January 2012, an increase of 22.9 percent.
We’re not only leveraging volume, we are also leveraging technology. Another way we’ve refined procurement is with Texas Smart Buy (TxSmartBuy.com), an online ordering system launched in 2008 where local governments and state agencies have ordered more than $2 billion in products.
Emphasize transparency and customer follow-up
In addition to maximizing efficiency for agencies, TxSmartBuy.com enhances the transparency of government purchasing for taxpayers. Anyone can use the system to view contracts and easily learn how much state agencies pay for products.
The Strategic Sourcing Division also wants to ensure state and local buyers receive the best products and services on purchases made using the contracts it has negotiated for thousands of items.
Strategic Sourcing staff generally contacts about 200 buyers each month. We survey our customers to find out if the arrangements are working — and to see if there are lessons we can learn to improve future requests for proposals. When we discover a problem, we take action to correct it. The Comptroller’s Office also has an active Contract Management Office which assists state agencies, institutions of higher education, CO-OPs, contractors, and internal customers with day-to-day contract management, contract administration, reporting requirements and vendor performance issues related to statewide contracts.
In the coming years, we hope to help Texas local and state agencies realize even bigger savings in procurement by increasing our participation with national procurement shops such as the National Intergovernmental Purchasing Alliance Company and the National Association of State Procurement Officials.
If Texas were a nation, we would have the 13th largest economy in the world. This allows us to leverage even greater purchasing power, creating a better bottom line for Texas and the rest of the country.
Susan Combs is the Texas comptroller of public accounts.