Public buyers adapting to accelerated government spending

The pace of government spending is quickening, say analysts at economic forecaster IHS Markit. The company says government buying will grow a little in 2018 over 2017. Total government purchases will reach $3.50 trillion in 2018, up from $3.35 trillion in 2017, a 4.47 percent boost, predicts the forecasting firm in a late March outlook report. State and local government purchases will reach $2.17 trillion in 2018, up from $2.09 trillion in 2017.

Some members of the International City/County Management Association (ICMA) see spending in their government units staying steady or growing. Budgets are steady, for example, in the Sunshine State. “Currently, we have no plans for cutting or expanding the current budget as the actuals are on pace with projections and our current budget is lean,” says ICMA member Cindy Lindsay who is finance director in Sanford, Fla. “For FY 2019, we are projecting that revenues will grow adequately to cover the cost of current service levels. We do not project expansion or shrinkage of current service levels. Those levels will be maintained.”

Revenues are strong in Arizona. “Phoenix does not expect to have cutbacks but does expect a slight increase in spending due to an improved revenue forecast,” says Milton Dohoney, assistant city manager in Phoenix, Ariz. “We expect our budget to expand due in part to a re-amortization of our pension’s Actuarial Required Contribution and better than expected revenue projections.”

Revenues are up in Washington State. “Our 2018 budget has been adjusted to slightly increase spending because of better than expected 2017 performance and increased revenue projections for 2018. We do not anticipate any significant changes during the 2019 – 2020 budget cycle based on federal tax legislation,” says Doug Schulze, city manager in Bainbridge, Wash. He does believe property owners in some parts of Washington will face sizable property tax hikes to fund statewide education initiatives.

Budgets haven’t grown in another community in Washington State, however. ”Yakima’s (Wash.) budget has been in a depressed state for several years. Our budget has grown only in salaries that were promised in collective bargaining agreements.  All of our other line items have decreased,” says Sue Ownby, procurement manager for the city of Yakima and Yakima County. She is a 34-year government procurement veteran.

To stretch tight budgets and boost efficiencies, Ownby’s department relies more on co-op buys. “Interlocal and cooperative purchasing used to be something we only did with our state procurement team, in order to piggyback their contracts. Now, we are often researching the multitude of interlocal and cooperative contracts out there and comparing them to see who has the best deal.”

Increasing budgets mean increased spending in many agencies, says Terry McKee, IT & Procurement Director in Knoxville’s (Tenn.) Community Development Corporation. He is the 2018 president of the East Tennessee Purchasing Association, and a firm believer that public procurement needs to become more agile, efficient and effective.

Those growing budgets will lead to greater use of cooperative procurement programs and contracts, McKee tells GPN. Public buyers, however, still need to closely scrutinize cooperative procurement opportunities. “They need to make sure the contractor can do the job, and that subcontractors are solvent and capable of doing the project,” McKee says. Governments also need to determine whether the agency can add its own terms and conditions to the contract, McKee adds. He believes cooperative organizations need to be accredited through initiatives such as the NIGP Accredited Cooperative Program. He urges public buyers to ask the following questions:

–Was the solicitation conducted in a manner congruent with your entity’s contracting conditions and qualifications (full open bidding, proper evaluation, goals met – if any, et cetera)?

–Does the procurement meet your entity’s legal and procedural requirements?

Michael Keating is senior editor for American City & County and the GPN web site. Contact: michael.keating@informa.com