When Strategic Sourcing Fails Taxpayers: NJ Transit and Telecom

Courtesy of The Strategic Sourcerer, I recently learned of yet another futile attempt by a government agency -- in this case a state government -- to fully take advantage of a cost reduction opportunity. In the above-linked post, we learn how the NJ Transit RFP for "Telecom Bill Audit and Recovery Services" stops short of getting budget overruns back on the rails. It's too bad, because as Source One, the company behind this particular blog opines, "Telecom audits, which typically include both a recovery aspect (getting credits for lines that should have been disconnected, as well as other mis-billings) and infrastructure optimization (disconnecting unused lines/circuits, changing services, etc) are a great way to reduce overall telecom costs." I could not agree more. So where did the NJ Transit agency go wrong?

To start, the RFP took the form of a 100+ page hard copy document "that was mailed to us via USPS Priority Mail." But the real kicker is the "extremely limited scope of work that NJ Transit establishes in the RFP: 'Identifying services that should have been disconnected but are still being billed are naturally a part of this effort and credits or refunds to the consultant are eligible from the date the disconnect was proven to be issued. There is no compensation for future savings nor is this a 'traffic engineering' RFP.'" Even as a non-telecom sourcing expert, I know that that there are many ways to go about savings that NJ Transit is not even considering. To wit, "in other words, finding lines that are no longer active, issuing a disconnect, and verifying the new prices, are not part of the scope of work. In fact, neither are other simple changes that could be identified when analyzing this type of data, such as moving to unlimited long distance lines where it makes sense."

So where does this leave us (besides having a transit agency that will continue to waste potentially millions of dollars on unnecessary or overbilled telecom services)? In short, "If one good thing came out of this proposal, it's that the 'Contract Specialist' that issued the RFP can demonstrate they spent a lot time writing a 100+ page document that makes absolutely no business sense and will achieve the little or nothing. Our government's finest, hard at work." To this, I might add that at least they're keeping the US Postal Service busy. In all seriousness, the fact that a public or private organization would go to such effort to completely miss the boat on potential category savings is a reminder that simply going through the strategic sourcing motions doesn't help anyone. Except, potentially, incumbent suppliers with politically connected executives who will gladly offer up a few margin points in campaign contributions in order to avoid having their gravy train go off the rails.

- Jason Busch

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