We recently offered our commentary in two posts (here and here) based in part on the opportunity and current participation of Federal agencies and departments in buying off of centrally managed/negotiated GSA agreements. This analysis got us thinking about the broader value that leveraged buying arrangements can generate for Federal, state, regional and city procurement organizations outside of simple unit cost reduction (when indeed the contracts are good -- which is not always the case). The result of this effort is a non-exhaustive list of five reasons we believe leveraging centrally managed supplier contracts and agreements makes sense in the public sector. Many of these items are also relevant in a private sector context, both when it comes to leveraging a centrally procurement organizations as well as working with group purchasing organizations (GPOs).
- The duplication of effort across agencies and departments on the Federal level, especially in the case of complex services (e.g., telecom, IT, print, consulting, software development, software implementation) which really do require category-level expertise to both identify and implement programs based on realized savings and value results in suboptimal results whenever centralized agreements and expertise are not leveraged or consulted; there are no "weekend warriors" when it comes to sourcing for complex services categories
- Aggregating the buy can improve and substantiate mission-driven procurement efforts including supplier diversity by concentrating spend with fewer suppliers which are then measured on their ability to achieve both price and non-price metrics (e.g., channeling a specific percentage of sub-tier spend to minority, women-owned or disadvantaged suppliers)
- Greater committed spend (based on the structure and review cycle for an agreement) will result in the ability to lock in spend upfront and to impact budgets in advance of new forecasts and cycles rather than keeping
- Supplier quality and performance can be more closely monitored, reported on and improved when an agency department or state/regional/local authority is part of a broader buying voice with a centralized organization that has the time and incentive to take action to improve the collective outcome for those groups that it represents
- Leveraging centralized agreements can make the overall reporting of savings and value that much easier for government buying organizations to justify their contribution to constituents both by enabling comparisons to initial individual bids received (against a centralized agreement) as well any reporting capability offered by the centralized authority that can demonstrate the savings and value generated by buying off the contract/framework
If you can think of other items to add to this list (or would like to further flesh out any of the concepts we've introduced on a high level thus far), please don't hesitate to comment or drop us a line. Also, please note that we're not advocating for leveraged and centralized structures in all cases -- just when they're appropriate, well executed and professionally managed.