In the private sector, shareholders can ultimately hold companies accountable for making poor buying decisions that waste cash. Yet when it comes to public sector procurement, constituents (i.e., tax payers) are usually so far removed from the buying processes that the nuances about how dollars are spent -- and over spent -- often go unnoticed. Here at Spend Matters, we know a number of folks in public sector procurement who are extremely dedicated to improving government-related acquisition activity in both the US and UK. Yet the yardstick by which we measure public sector activity must be more transparent.
It's not enough to reduce spending (and budgets) overall or better manage demand (i.e., cut off spending before it happens), however important these two items are. It's also essential to enable civil servants to buy smartly at the frontlines of government, taking advantage of centralized agreements that leveraged, volume buying power and overall spend clout can provide. But we're not talking about the kind of clout that campaign contributions have historically given in Chicago and Illinois, mind you. Simply put, clout in procurement -- at least in large part -- is about enabling suppliers to better leverage a relationship and forcing a discount, accordingly. Theoretically, everyone wins in a leveraged purchasing arrangement. Procurement organizations can claim victory through negotiated discounts and consolidated supplier relationship that can improve quality and responsiveness. And suppliers benefit from receiving a larger portion of the spend pie.
Yet according to a recent Executive Gov article, Federal departments and agencies in the US are only just beginning to take advantage of proven, centralized contracts and buying agreements, despite an effort dating back to 2005. As background, "The Office of Federal Procurement Policy introduced strategic sourcing in 2005 to encourage multiple agencies to purchase office supplies and other products on one contract vehicle in an effort to cut costs." And these efforts are working -- even across complex categories -- when implemented. To wit, the "GAO said in a December report that inter-agency purchases cut the government's spending on printing products when purchases were made on GSA's multiple award schedule program."
Stay tuned as we explore the potential of these efforts to drive incremental Federal acquisition savings in Part 2 of this post. We'll also take a look at how well such strategic sourcing and centralized contracts/buying programs have been adopted so far across Federal agencies and departments.