Spend Matters welcomes a new guest post from Dan Warn of BravoSolution.
The U.S. managed to avoid hurtling over the fiscal cliff—barely. Now, sequestration inconveniences travelers and summer visitors to national parks. Debates range on (and on and on) over cutting entitlement programs and/or redistributing wealth. All while few on Main Street enjoy the effects of the recession having ended.
While the powers-that-be wrestle with the Gordian knot of which is better—big government or small government—here’s a thought. There may be much to be accomplished with a little application of the best practices used in procurement by many large companies, and increasingly, foreign governments.
Let’s start with what spend analysis could do in the area of government spending.
I think it’s fair to say that most taxpayers believe that government spending is inefficient and not at all transparent to those whose dollars are being spent. Many believe it’s bloated as well ($800 hammers, anyone?). Tackling the problem of where and how dollars are being spent might, in fact, give the U.S. government an interesting answer to the question of whether more revenue is the answer.
The challenges to gaining visibility into spending are real:
- Messy, inconsistent data that's housed in multiple systems and files
- Outdated sourcing technologies and procurement practices
- $400 billion spent annually on goods and services, with hundreds of thousands of suppliers
What the Government Procurement Service (GPS) in the UK found, though, was that these obstacles can be overcome with spend analysis. In fact, the UK procurement teams found that by combining spend analysis technology with rigorous processes, they could significantly reduce the inefficiencies driven by supply-base variety and variability. The result: in just six months, the team found nearly $650 million in initial savings across 78 organizations totaling $70 billion in spend.
Spend analysis answers the questions that procurement teams need to ask to optimize spending strategies:
- Who are we buying from?
- How much are we are spending?
- Who else delivers the same product or service? At what costs?
This information is immediately actionable. With it, procurement teams can see where there might be opportunities to consolidate spending, negotiate better pricing and/or terms, and reduce risk by ensuring compliance with mandates.
This discipline can also fuel insight and communication into the economic impact of government decisions—contributing in a meaningful way to the more intractable challenge of just what the government should be funding. Who knows, with transparency into how tax dollars are spent, maybe the arguments will move from political bickering to fact-based, ROI-driven decision making.